Reform by Any Other Name
Healthcare Reform Panel
Prescription for Change
Not a Bitter Pill
Cut Out the Middle Man
MODERATOR: There are other cost-related and choice-related questions surrounding things like HSAs and employee engagement.
SABATINO: We are seeing organizations, both public and private, starting to really move very quickly to some sort of CDHP strategy. And the reason for that is, quite frankly, there’s nowhere else to go.
The bigger concept beyond just controlling costs is about engaging the individual. Because ultimately as a country we are doomed if we can’t wrap our heads around the fact that the number one stakeholder in all of this is the individual. So how do you do that? You start to create an environment with a health plan and benefit structure that rewards and penalizes, so there’s carrots and sticks for doing the right thing and for doing the wrong thing.
MODERATOR: Self-funding is something that probably most groups haven’t thought about or maybe even heard about before, and there certainly is a lot of interest in that. Why there is an interest in self-funding?
SELMAN: Self-funding certainly isn’t a new concept. It’s been around for 30-plus years. The reason why I believe self-funding is becoming increasingly popular is that it’s an empowerment strategy to the employer or the plan sponsor.
Basically it allows a plan sponsor that has heretofore not known how they have been utilizing their healthcare to have full disclosure. It is not a state-sponsored program or under the prong of insurance. And a plan sponsor has the ability to really enact complete transparency. They can choose the vendors to work with. They can choose the wellness initiatives or the health initiative strategies. They can pick the panel of physicians that they choose to go to. They have great discretion over designing their plan benefits.
The most empowering thing about self-funding is that every single month the plan sponsor, in conjunction with their brokering consultant, receives from the administrator a full accounting of how every dollar was spent. This, then, allows them to strategically engineer their benefits to maximize their dollars spent. So at the end of a plan year, as they go into renewal for their stop-loss contracts, they go into it absolutely knowing what they spent. So the negotiation on the renewal becomes a fair fight, if you will. It’s not a matter of, “The carrier has given me an increase of X and I’m not quite sure why.”
It’s not a free ticket. The cost of the care is still the cost of the care. But it allows a plan sponsor to use a plug-and-play methodology in determining who their partners are going to be. Do they need a wellness program? Do they need a claims auditing partner? Who is going to be their prescription vendor?
So the transparency model is empowering and ultimately, over the long run, if a group is engaged in a self-funding strategy for a five-year period and beyond, their cost of care becomes very predictable. From a stop-loss perspective, you see that all the time. You become 100 percent credible. So at renewal there’s never a negotiation as to why the renewal is what it is, because it’s obvious based on the numbers.
MODERATOR: With self-funding, you self-fund a portion and then you have stop-loss insurance behind it. So it’s not like you are completely paying all the claims yourself.
WILLIAMS: You do have the protection against individual catastrophic loss with the specific coverage, which will cap an employer’s risk for any given individual for a large claim—cancer, dialysis, transplants, that sort of thing. So they are capped from an individual perspective.
On your first-dollar claims—the office visits, prescription claims, radiology, all that sort of thing—all the first-dollar claims that make up the bulk of the healthcare cost, the carrier will give you 100 percent credibility towards those claims, and you are rated based on your own merits. And since those dollars are yours and not the carrier’s, if your claims continue to run wild, it’s very easy for the carrier to potentially hold your factors, which again is the bulk of your claims costs, or even get a reduction on your aggregate factors. There’s no build in of profit, or there’s no incentive for the carrier to ding you on the bulk of those dollars to try to make some extra money or something like that because, again, they are your claims.
AUDIENCE QUESTION: They impose the hit tax upon fully insured plans and it’s a big dollar amount. Why do you think the government has isolated fully insured plans? And do you think potentially down the road that could change? Is there a different degree if the carrier is for profit versus nonprofit?
SELMAN: The hit tax is a big number and certainly goes up. I was talking to House member Jim Dunnigan yesterday, and I think what’s going to happen is the regulation on the self-funded arena will probably come to the stop-loss carrier community through taxation provisions. We have already seen some introduction of that. NAIC wanted to implement some restrictions on stop-loss vendors in each state.