Here are the two techniques we found essential to saving 11% on our Autism Therapy client's bill this year.
A Broken Industry
In recent years anything related to health insurance has been given a bad name. Condemned as broken, anyone in the industry is met with skepticism. And rightly so! Everyone in the industry feels the same, but even in this broken industry good people figure out ways to make business less painful.
Most brokers can compete on price, but the cost for Blue Shield usually looks a lot like the cost from Anthem, and the cost from United. There's only so much that can be negotiated away, so in order to really cut costs something more must be done.
When this happens our job changes from negotiation to plan design. Specifically getting plans that have benefits that will be used, as opposed to benefits that just cost clients their money.
It’s the easiest way to save money, and in the past has reduced up to 12% to our clients. That is as good as reducing a plans cost from gold level to silver, with no actual reduction in benefits. Recently, we discovered these are actually the techniques used yearly by the brokers of more than one-hundred Fortune 500 companies.
How well did this process work?
The client in this case study, a large Autism Services provider, saved $560,000 in 2017 due to these changes. A full 11% of their premium.
Here are the two main things we did.
Targeting of In-Use Doctors and Their Networks
The process for network targeting is fairly simple.
Step two is where the having an advanced as opposed to amateur broker is key. For example, employees need the flexibility to find multiple specialists in case one or more of them can't do what's needed. Without the knowledge of what each Insurance companies plans are like a broker will waste dozens of hours and not necessarily find the right plan even then.
Targeted Use of Prescription Drug Plan Designs
This strategy is very similar to doctor and network targeting but requires more work, and much more consideration.
The process is as follows:
This process is delicate as some employees needed particular drugs for serious conditions. For the few employees like this we also offered plans that covered prescription drugs almost exclusively.
This is a strategy we considered, but ultimately rejected for reasons I'll state later. First, I'll give an overview of what it is.
This strategy is nearly exclusively used with employers larger than 250 individuals, but it need not be. We have seen it used to avoid costs in companies smaller than 50 people.
Self-Funding is where a company covers employees like an insurance company. This reduces the cost of the plans by eliminating the insurance companies’ profits, allowing for greater coverage or a smaller cost. In order to do this a company works with a Third-Party Administrator which normally collects premiums and pays claims on behalf of the company. They then return the excess premium minus their small administration fee.
Self-coverage works well when the employees have below average healthcare costs because an insurance premium can be thought of as the average cost for that type of employee (without including the insurance company profits of course). Our client had higher costs than average and the savings from cutting out the insurance company profits simply weren't worth it.
If you are smaller than 250 you can do this without exposing yourself to completely covering a catastrophic illness by providing cheap catastrophic coverage for the high-cost drugs and specialists and cover the everyday doctor visits yourself. This is called Partial Self-Funding. One of our clients at 48 employees used this to save $60,000. That’s $1250 per employee, and almost 15% of their cost!
The Bottom Line
The HR administrator who is serious about avoiding unnecessary costs will examine each of these options in depth with their broker. Each strategy is really a form of knowing the needs of your company then cutting out the unnecessary.
Uncertainty is where Insurance companies increase services that aren't needed and present unjustified prices.
The obvious drawback when cutting the unnecessary is sometimes a mistake is made and you cut the necessary. That's when having a professional broker is key. Most brokers can process enrollments without issues, but knowing what moves can cause serious damage is something only knowledge and experience can give.
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The authors of this blog are Charles Best, Daniel Best, and Jonathan Rudnick.