Companies are faced with a difficult balance - offer employees a meaningful health plan and manage the ever-increasing costs of providing healthcare coverage. Since the Affordable Care Act's employer mandate became effective in January 2015, many have found self-funding to be an efficient, effective solution for the cost problem. Self-funding allows employers the flexibility to design a customized plan that fits their employee health care coverage needs and the opportunity to take greater control of health care dollars they spend on coverage.
According to the Kaiser Family Foundation/Health Research & Educational Trust (HRET) 2014 Employer Health Benefits Survey, 149 million non-elderly people in America are covered by an employer-sponsored medical plan. Nationally, the trend of providing self-funded medical plans is on the rise among employers of all sizes, and three in five covered workers participate in a self-funded plan.
Employers are no longer passive about finding the right solution to continually rising health care costs and have gravitated to self-funding because it offers opportunities for benefit flexibility, enhanced transparency, exemption from state insurance laws, heightened ability to negotiate collective bargaining agreements, improved cash flow, and employer-focused cost management strategies.
While there are numerous benefits to a self-funded arrangement, the right integration of utilization and disease management programs can significantly reduce a self-funded plan's medical spend.
Mitigating health risk for today and tomorrow
Employers should invest in health solutions for their entire workforce, regardless of the health status of the current employee population. According to the Centers for Disease Control, as of 2012 about half of all adults had one or more chronic health conditions while one in four adults had two or more chronic condition. And, 86 percent of all health care spending in 2010 was for individuals with one or more chronic conditions.
This epidemic is expected to continue; making it imperative for employers to proactively address their employee population's health and overall wellness. The movement to achieve improved employee health has expanded to third party administrators (TPA) as many TPAs today offer some form of wellness and disease/case/utilization management programs. These programs are shown to be extremely effective in mitigating unnecessary health care costs, while ensuring plan participants receive the right care at the right time.
Focusing on total population management through an integrated medical management program encourages preventive care and, over time, helps individuals understand their health risks to avoid higher cost claims and more invasive procedures. Self-funded employers often assume low benefit utilization equates to a healthy population. However, it is shown that low utilization may only signify an employee population that is too afraid or unconcerned about their health to take proactive steps toward health improvement.
Low utilization may also be a reflection of plan participants aiming to save money as a result of a high-deductible plan. Through educational outreach efforts often found, in self-funded models, employees are incentivized for preventive visits and diagnostic testing. Some TPAs integrate large educational outreach offerings and encourage participation through direct mail, telephone calls and email communications.
This is all done in an effort to proactively address the health of the population rather than wait until manageable conditions advance and require more invasive, costly care. An independent study performed by Zoe Consulting, Inc. found that 1,400 employers using a wellness program had a 20 percent lower annual medical spend than those without a wellness program.
The wellness program analyzed in this review used data collected from health history questionnaires and blood analyses to create a composite view of overall health and a personal health score was assigned. This score was used to identify those likely to benefit from intervention and health coaching. This awareness benefits those who are generally healthy and those with serious health conditions by providing recommendations, resources and programs for maintaining or improving health.
With goal setting, outreach and coaching, plan participants became personally accountable for their own health. The plan participants also worked with physicians to create personalized pathways to better health based on the individual's health status. Achievable health goals were identified and set to assist the participants in improving their personal health score (for example, lowering the individual's weight with the adoption of a healthier diet).
This proactive approach not only improved health and reduced medical cost; employers also reported reduced absenteeism and overall employee satisfaction.
Chronic illnesses have considerable impact on financials
As little as 15 percent of plan participants can generate a disproportionate share (as much as 85 percent) of medical claims cost, according to the Robert Wood Johnson Foundation. This spending has a significant impact on the overall health care costs a self-funded group faces; therefore, methods to mitigate the cost are highly encouraged. Prevalent chronic conditions, such as asthma, coronary heart disease, chronic obstructive lung disease, diabetes and hypertension, are often present in this high-cost population.
Outreach efforts through integrated medical management enables the employer and the employee to reduce overall health care spend. Common methods TPAs use include educational outreach, diet compliance, physician oversight of care, prescribed medical therapies and lifestyle changes.
Case Management: the key to long-term cost savings
While wellness offerings and programs to manage chronic conditions are two opportunities to reduce health care cost, case management programs have also been found to be extremely effective for employers. Case management programs offer plan participants the opportunity to work with health care professionals and/or registered nurses, one-on-one, to oversee and coordinate all aspects of treatment.
Plan participants, their families, and caregivers are given access to the education and support necessary to assist those considered to be high-risk for health issues or who are currently facing challenging health problems. Plan participants who become engaged with a case management program benefit from the following:
- Patient education for effective program use and health cost reduction
- Identification of treatment options and coordination of patient care
- Evaluation of the plan of care, ensuring services rendered are covered under the patient's plan
- Complete coordination of all care for cases that are ongoing, high cost and complex in nature
A patient, newly diagnosed with adult insulin-dependent diabetes, was discharged home with no home health care needs identified by the charging facility. During a phone conversation with the patient after discharge, the TPA case manager learned that the patient was having difficulties administering the insulin.
The case manager then obtained an order for home health nurse evaluation, revealing that the patient was not able to retain the education provided at the hospital and that her blood sugar levels were extremely unstable. The case manager coordinated a home health nurse visit to educate the patient on administering insulin, while also monitoring her progress and blood sugar levels.
- Within one week, the patient's sugar levels were under control, demonstrated thorough understanding and voiced satisfaction with the ability to self-care.
- The need for an emergent admission for uncontrolled blood sugars was averted.
Total Cost Savings: $12,500
Employers are searching for a solution to provide quality health care benefits for employees while curbing the rising cost of health care. Self-funding with a customized integrated medical management program is integral to the success of the plan. For more and more employers of varying sizes, self-funding is a viable option providing successful results - healthier employees and a healthier bottom line.
About the Author
Laura M. Hirsch President, Nova Healthcare Administrators, Inc. Hirsch, a 25-year veteran in the self-funded health care industry, leads Nova, one of the nation's largest TPAs. She directs Nova to focus on client needs, delivering exceptional service, operational excellence and increased cost savings. This customer-centric philosophy results in industry-leading client retention and long-term partnerships.