Tag Archives: Labor Press

Improving pricing and increasing efficiencies

Multiemployer health and welfare funds face a difficult challenge—how do you maximize benefits provided to your members while operating under a collective bargaining arrangement where the contributions paid to the fund are generally predetermined? In other words, how do you get the biggest “bang for your buck”?

There are a few ways to maximize the dollars spent on benefits—including optimizing pricing terms from vendors and audits, and reducing administrative costs.

Creating a benefit program that operates efficiently traditionally depends on the size of the group. Many insurance carriers, third-party administrators (TPAs), and pharmacy benefit managers (PBMs) offer more favorable pricing to groups that are larger in size. TPAs may offer lower administrative services only (ASO) fees and PBMs may offer better administrative fees, discounts, and rebate guarantees. Larger groups may also be able to negotiate trend or maximum increase guarantees in their renewals.

An alternative way to achieve better pricing terms is to join a labor coalition. Labor coalitions are set up as a group of welfare funds that contract with a particular provider or providers in exchange for more attractive pricing. The coalition operates as a collective with a board that makes recommendations, but each individual fund is still responsible for its own claims experience. The benefit is that vendors (generally, PBMs and stop-loss providers) will offer better pricing or lower administrative costs because they have exclusive contracts with the larger coalition, so each individual fund receives pricing based on a population much larger than its own.

In addition to administrative expenses that are paid to insurance carriers and TPAs, funds should review operating expenses. Administrative expenses are necessary so that a fund can provide benefits to its members, but dollars that are devoted to administration are dollars that are not being used to provide benefits to members. Therefore, it is in the fund’s and the members’ best interests to keep administrative expenses as low as possible, by reducing duplicative operations or by consolidating certain efforts.

You can also ensure that the dollars spent on claims are consistent with the intent of the plan with a claims audit and / or a dependent eligibility audit. A claims audit is generally performed by an outside vendor, who reviews a sample or a certain subset of self-insured claims that the fund’s TPA pays on behalf of the fund. Claims audits typically need to be written into the TPA contract. Dependent eligibility audits are also generally conducted by an outside firm that sends mailings to all members with dependents. Members must provide proof of eligibility (e.g., birth certificates, marriage certificates) for each of their dependents so that their dependents continue to be eligible for the plan. A dependent eligibility audit can remove spouses who are divorced or children who aged off of the plan, ensuring that the dollars spent on members and dependents are only for those who actually should be on the plan.

Finally, it is good practice to do market checks or requests for proposals (RFPs) on a regular basis. A market check is a pricing comparison and analysis to compare competitive pricing for substantially similar-sized customers and for substantially similar PBM services. The market check is measured on the basis of a total, aggregate comparison of the pricing terms offered by a single vendor to a single plan, and not on the basis of individual pricing components or best price points available from multiple vendors. Aggregate PBM pricing comparison includes the sum of the cost of medications, including dispensing fees and claims administrative fees, less rebates received by the plan. This type of analysis creates leverage in negotiations with current PBMs, as well as informing trustees when it may be time to renegotiate and / or consider a more competitive PBM contract. On the other hand, an RFP process asks for quotes from other providers (in addition to your current provider) and allows you to determine whether another carrier or service provider can provide a better or more cost-effective product. For prescription drugs, it is a good idea to do a market check on a regular basis, although PBM contracts often establish market check parameters that limit the ability of plans to perform this important benchmarking. It is also a good idea to perform an RFP once the contract is set to expire, allowing yourself enough time (at least three – six months) to implement a new carrier as smoothly as possible if you decide to switch after analyzing the RFP results. For other vendors, it is a good idea to do an RFP on a regular basis.

This article first appeared on LaborPress.org.

Managing autism treatment in self-funded plans

Self-funded plans frequently deal with issues at the intersection of physical health, behavioral health, medical science, and government regulation. One emerging issue that relates to each of these areas is Applied Behavior Analysis (ABA) treatment for autism spectrum disorders (ASD).

ABA is one of the fastest growing state benefit mandates. Today, 46 states mandate some form of autism coverage with varying degrees of benefit coverage and limits. ABA is a prime example of the type of coverage required by state mandates.

The prevalence of ASD has risen precipitously. In the early 1980s, population prevalence was estimated at 0.05% (five of 10,000 children). The most recent studies estimate prevalence to be 1.5% (one in 68 children). Traditionally, commercial insurers excluded or minimally covered treatment for ASD. However, more recent federal mental health parity laws and essential health benefit requirements (EHBs) of the Patient Protection and Affordable Care Act (ACA) have served to increase access to ASD treatments.

ABA is a behavioral strategy to improve socially significant behaviors to a meaningful degree. Targeted behaviors include adaptive living skills such as gross/fine motor skills, social skills, communication, reading, eating, and dressing. The ABA treatment regimen typically involves highly structured, intensive interventions for up to 30 or 40 hours per week. The course of treatment can last many years, from diagnosis at early ages (e.g., ages 3 to 4) through adolescence (and sometimes beyond).

While self-funded employer-sponsored plans are not required to comply with state mandates under federal law (ERISA), they are not immune from the trend toward greater ABA coverage driven by state mandates for insured plans.

Challenges for self-insured plan sponsors include:

Medical necessity. Medical carriers will often advise that ABA is not medically necessary for its self-insured customers but will cover it for its insured business to meet state mandate requirements. This makes it difficult for plan sponsors to explain to members why it is not covered under their plan.
Cost. Assuming conservatively the average age of diagnosis is 4 years and average age of completion is 15 years, adding this benefit can be a long-term expense to the plan. Cost estimates range between $25,000 and $50,000 per case per year.
Utilization management. If plan sponsors decide to cover ABA, then it is important to make sure members access school-/community-based services, which play a significant and progressive role in offsetting plan costs.
Network management and provider credentialing. As demand for ABA services grows, plan sponsors may want to review credentialing and network utilization to assure ongoing access to qualified providers for these services.
Compliance. Plan sponsors must not run afoul of the Mental Health Parity and Addiction Equity Act (MHPAEA), which prohibits plans from restricting mental health benefits more so than physical health benefits.
Related benefits. Even if a plan specifically excludes coverage for ASD treatment and diagnosis, members with autism are most likely already receiving related functional health benefits such as physical therapy and speech therapy (habilitative and rehabilitative). It is important to understand the interconnectedness of benefit administration and the underlying equities.

The increasing prevalence of ASD, the growth in state ASD benefit mandates, and the widespread treatment of ASD through ABA can affect self-funded plan sponsors, requiring them to think comprehensively about balancing member needs and access with care cost and care management.

This article first appeared on LaborPress.org.

Controlling rising medical costs

The 2017 Milliman Medical Index noted that medical expenditures (inpatient, outpatient, and professional) made up about 80% of the total cost of healthcare for a family of four, and that nationally the cost increases from 2016 to 2017 were about 4%. However, many employer plans have experienced much higher cost increases, especially in certain areas of the country. In 2016, for the first time, independent physicians made up less than half of the practicing physicians in the United States, according to an American Medical Association (AMA) study. Physicians who work with hospitals charge a facility price at their offices, which could result in increases in costs and significant discrepancies in prices for the same services. Additionally, hospitals have continued to merge with each other, and while these mergers offer the potential for lower costs by increasing efficiencies, a 2016 study by Northwestern University, Harvard University, and Columbia University found that prices at merging hospitals actually increased 7% to 10% if the hospitals that merged were within the same state. Given these factors, along with general price inflation and increased utilization, plan sponsors should consider ways to mitigate costs using any or all of the strategies below.

Price transparency and quality

Providing price transparency, coupled with information on quality of care, is a way to promote consumerism within a health plan so that both the plan sponsor and the members who are receiving benefits can save costs. There are various vendors that offer plan sponsors and members the ability to “shop” for surgical procedures and doctors based on price and quality metrics. Cost and quality advantages can result from steering members to specialized “Centers of Excellence” for given procedures. Members can be incentivized to choose the lower-cost facilities or physicians (without sacrificing quality) through a reduction or elimination of member cost sharing, or even with rebates (that is, the plan will “pay” the member to choose a lower-cost alternative).

Narrow networks and carve-outs

Another way to steer members toward cost-effective facilities is through the use of a narrow network. Most health plans offer a narrow network option (for both insured and self-insured plans), which limits member access to smaller pools of doctors and hospitals within their larger networks. The narrow (or preferred) network promises better discounts on claims than regular in-network claims, and the plan sponsor can encourage members to use these facilities by reducing member cost sharing within the narrow network. The plan is designed to have an additional tier of cost sharing, with the preferred network having the lowest member cost sharing. Furthermore, plan sponsors with direct contracts can consider carving out a particular facility from in-network if the facility is not a cost-effective, high-quality option (and there are other options available to the members).

Alternative payment strategies

In addition to steering members through plan design and incentives, certain plan sponsors can look to alternative payment strategies to further control costs while ensuring that quality of service does not suffer. For example, a bundled payment can be used in place of fee-for-service for certain procedures with predictable episodes of care (e.g., total joint replacement). The plan sponsor pays the same amount regardless of days spent in the hospital or on rehab visits, which can help to reduce unnecessary services. A plan sponsor can also enter into a shared savings arrangement with a group of providers, such as an accountable care organization (ACO). An ACO is a group of doctors and hospitals whose focus is on providing coordinated care to certain members within a plan. Ideally, the main goal of both the ACO and the plan is to keep costs low without sacrificing quality. If successful, both share in the savings achieved. Plans with a large enough membership can enter into these alternative payment strategies on their own; for smaller plans, they may be able to contract through their insurance carrier or third-party administrator.

This article first appeared on LaborPress.org.

Effectively communicating plan design

As multiemployer plans focus on delivering health benefits to their members in a cost-effective and efficient way, a key component is clearly and concisely communicating the thought process behind plan design and plan design changes.

Given the limited amount of money available to spend on benefits, multiemployer plans must avoid unnecessary services and reduce waste in an effort to contain costs. As a result, increased member cost sharing, restrictions on certain services, and more tightly managed benefits are often implemented to manage the plans’ spending.

However, despite these changes mainly being made for the “greater good of the plan,” they will be interpreted in different ways (generally negatively) by the membership. For example, a plan with high emergency room use (for nonemergencies) may increase the emergency room copayment (and perhaps lower the primary care physician copayment as an offset). For a member who legitimately needs to use the emergency room, an increased copayment will feel like a punishment. But if the change is communicated effectively, along with the reason(s) for the change, members may be more likely to be amenable to the change.

Effective communication to members includes delivering the message via email, pamphlets, mailings, bulletin board postings, or meetings—any mode of communication that reaches the membership. The message should be concise—the fewer the words, the more likely members will listen—and it should be repeated often. For example, if the plan wishes to emphasize preventive care to avoid higher-cost services in the future, the headline could be “The Importance of Preventive Services,” and members should have multiple opportunities—at least once every three to six months—to receive the message until the plan is sure that the message has been heard. If the membership understands the plan’s goals in administering benefits, the plan is more likely to achieve or even surpass these goals.

This article first appeared on LaborPress.org.