Chapter 4: Self-Insurance: Companies Keep Their Health Savings
Aggressive executives don’t want to be lumped into an insured pool of passive payers who are doing little to control their health care costs. … They want to keep offering a health care benefit, but they can’t afford the double-digit annual premium increases levied by fully insured plans.
The enabler for smaller companies is to shop for what’s called stop-loss insurance at the right level to protect themselves against catastrophic medical incidents or a rash of claims. … We stop our losses at $200,000 and pay a premium of $250,000 per year to do so. … For companies with fewer than 50 employees, the median stop-loss (or deductible) was $35,000 in 2012
In an unexpected twist, some small employers with healthy workforces will use ObamaCare to their advantage: they will move to self-insurance to save money. Then, if they have a bad year with a couple losses that exceed their stop-loss limit, and they are faced with premium hikes for the following year’s stop-loss coverage, they can bail out to the new health insurance exchanges. … In effect, the small companies have a backup plan mandated by the federal government. They have a safe harbor if self-insurance doesn’t work out.
Companies that self-insure still need a health plan that offers a network of providers and discounts. And they need an Administrative Service Organization (ASO) to administer claims. Almost no company wants to process its own claims. … Fortunately, the big health insurers like the ASO business, so they offer not only the stop-loss insurance but also the discounts obtained from their network of providers and their transaction services. They like group contracts for more than individual policies for health insurance.
Most small companies also cover themselves for “aggregate” losses to protect themselves against a bad year overall for medical losses. The most common policy is to protect at more than 125 percent of expected claims for a given year.
The main deal is to get your company self-insured. But self-insurance is just a launch pad for other reforms. By itself, it doesn’t yield big savings. … Once self-insured, a company can embark on other reforms, such as installing consumer-driven incentives, making prices and quality of procedures transparent, purchasing from Centers of Value, aggressively managing chronic diseases, and offering proactive primary care.
Chapter 5: Consumer Driven: Companies Engage Employees
Employees become real customers, and a company’s health costs are reduced by 20 to 30 percent. … When people spend their own money, even if their employer gives it to them, they consume much more wisely than if someone else pays. … Companies are working with employees to improve these five behaviors:
- How employees utilize health care
- How they purchase care when they need it
- How they live their lives – their lifestyles
- How they follow regimens if they have a chronic disease condition
- How they collaborate with their doctor on long-term health
The immediate bang for the buck comes from reducing overutilization. For instance, instead of using a physical therapist for months of sessions after surgery at $600 per hour, the employee-turned-consumer quickly figures out when to end the supervised treatments and do the exercises at home.
A person might tough out a sore throat and avoid an office visit that costs $160. If it gets worse, she would go to a convenience clinic or a doctor’s office, but she wouldn’t even think of going to an emergency room, where she’d pay $600 or more for a visit.
Smart employers also contract for relatively inexpensive advocates for their employees to help weigh tough decisions on surgery or no surgery. … Smart employers offer incentives to plan members to audit medical bills for overcharges. Employees are allowed to keep up to half of any errors discovered, and they soon find that overcharges are rampant.
HSA vs. HRA Chart pg 74
The charm of account-based health plans for employees is at least twofold:
- People like being in control of major parts of their lives. They are quite capable of buying homes, automobiles, computers, life insurance, and education for themselves and their children. Why would they not want to control their spending on health care?
- Totals in HSA accounts, for which contributions, buildups, and withdrawals are tax free, are becoming real assets. A few have reached six figures.
Chapter 6: Transparency: Entrepreneurs Shine Light on Prices, Quality
Transparency platforms are absolutely necessary for intelligent consumerism to take hold, because providers are woeful at best, and misleading at worst, at volunteering real prices and meaningful quality ratings. … the trick for employers is to get employees who need a procedure to use the site and to use the best providers. The best method is plain old cash.
Example: MedSave plan offers $2000 in cash to coworkers who select a Center of Value for a joint replacement of coronary bypass. It’s $500 for smart purchase of a colonoscopy and $250 for an MRI. … Other companies use the stick instead of the carrot. Employees pay more if they pick low-value providers.
Again, though, the trick is getting a high level of steerage to the best provider in the emerging marketplace for health care. That’s where the major dollars are saved.
Ultimate price transparency comes from what is known as bundled prices. Corporate payers are demanding all-in prices for an episode of care, and they are getting them.