Cost management opportunities and strategies to optimize employer health plans
Employers are increasingly pursuing cost management initiatives and education as part of comprehensive wellness initiatives.
Newly enacted federal legislation supports employer-sponsored health plans with added levels of insight, protection and fairness. This offers plan sponsors an opportunity to implement cost management strategies that will improve the value participants receive.
Employers are increasingly pursuing health care cost management initiatives and education as part of comprehensive wellness initiatives – health and wealth. One key change will prompt employees to become consumers who better manage their own health care choices as well as their utilization of health care services. This has the potential to generate the greatest savings. Informed choice has value. Well-informed choices are part of being well-prepared. Preparation means acting like a consumer. Too frequently, once individuals become patients expense is no object – especially when the plan is footing the majority of the cost.
Taking advantage of price transparency
Rising inflation and its effect on health care costs and spending has put price transparency in the spotlight. As of January 1, 2021, the Centers for Medicare and Medicaid Services (CMS) issued mandates that hospitals operating in the United States provide clear, accessible pricing information online about the items and services they provide. Under CMS guidance and final rules, hospitals are required to make pricing information available in machine-readable format, as well as provide a list of shoppable services that a patient can schedule in advance. This is intended to make information accurate and easier to access for health service consumers to compare prices, estimate the cost of care, and confirm market value.
Related: Health care consumerism and price transparency tools: Are your employees equipped?
Price transparency is, however, expected to add to inflation. In turn, we expect it will trigger a (re)introduction of health care consumerism strategies. Health care consumerism is a growing movement, a term that became noteworthy with the industry’s shift toward value-based care. Price transparency, in effect, helps empower participants to be better health care consumers. Increased transparency in prices and services can transform health care coverage by putting the economic purchasing power and decision-making in the participants’ own hands.
Price transparency, knowing provider and hospital fees prior to receiving care, provides an opportunity to better manage participant-paid costs. This empowerment is especially important in today’s economy.
Health savings accounts as a cost-management trend
Many workers today are “financially fragile.” They live paycheck to paycheck. They have not set aside savings specifically earmarked for out-of-pocket medical expenses, including regular cost sharing – deductibles, copayments or coinsurance. The COVID–19 pandemic has exposed the possibility that a much larger segment of Americans may be financially fragile – triggering loan and rent forbearance actions as well as dramatic cash infusions – increasing debt. As costs continue to increase, more employers are considering a shift in plan design and financial support from funding coverage to funding Health Savings Accounts (HSAs).
HSAs have evolved as part of a “health and wealth” rewards strategy. The funds contributed to an HSA pay for eligible health care expenses including almost all out-of-pocket expenses. In addition to funding current medical costs, HSAs offer tax-preferred utility capable of quadruple duty – current and future year out of pocket spending, medical costs in retirement, a source of income in retirement and potentially, survivor benefits. Unlike the Health Flexible Spending Account (Health FSA), monies contributed to HSAs are fully vested, never forfeited.
Contributions receive the most valuable benefits tax preference offered by the tax code. More items qualify for tax-free reimbursement as eligible expenses under HSAs than under Health FSAs. Contributions to HSAs are not subject to federal and most state income taxes, FICA and FICA-Med taxes, and the earnings in the account grow tax-free. Unspent money rolls over end-of-year, available for future health expenses, to be used as income in retirement or as survivor benefits.
Because most employers do not offer HSA-capable coverage, those who do add this option in 2022 can still gain a competitive advantage for both the employer and participants.
Growing adoption of self-funded health plans
Roughly 49% of the U.S. population receives health coverage through their employer. The average increase in individual health insurance premiums has been about 4.5% per year for the past five years. Higher insurance premiums are only part of the picture. In nominal dollars, some Americans are paying more out-of-pocket than ever before
Employers who choose to implement a self-funded health plan are attracted to the unique cost management opportunities when compared to premiums, taxes, profit margins and other requirements that apply to fully insured plans. Self-insured health plans continue to grow among small and mid-size employers. In fact, according to a 2021 Kaiser Family Foundation Survey of Employer Health Benefits, approximately two-thirds of workers have self-funded employer-sponsored coverage. All industry professionals expect the trend towards self-insurance will continue. A self-funded plan pays claims costs only as incurred and can limit liability through stop-loss insurance.
Reference-based pricing: A self-funded health plan’s MVP
Even with greater transparency, significant price variations can still exist across hospitals and providers for standard procedures. To mitigate this, many self-funded health plans have adopted reference-based pricing (RBP) strategies. Designed to moderate excessive hospital costs, RBP establishes a benchmark fee schedule and payment ceiling instead of negotiated fees by contracting with a provider network. Plan sponsors and participants benefit from the consistent application across all providers and health networks.
Performing claims analysis
Plan sponsors recognize there is considerable room for improvement through claims analysis. Innovative medical billing services utilize powerful data-driven software and online data analytic tools that can provide a degree of price transparency and new insights by harnessing price data electronically – allowing fee comparisons that identity fair and reasonable prices.
Your medical billing partner
The right medical billing partner will be an agent of change, one that embraces innovation and advocates for “what is fair and just” in the marketplace. The right partner will also provide value-added services through turnkey solutions, administrative support, and the legal representation of participants. This support can provide invaluable guidance to identify areas to lower risk and exposure, contain and manage costs and maximize value.
Christine Cooper is the CEO of aequum LLC and the co-managing member of Koehler Fitzgerald LLC, a law firm with a national practice. Christine leads the firm’s health care practice and is dedicated to assisting and defending plans and patients.
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