By Todd Rolland, Summit
It is no secret that employee-benefit costs are rising. As an employer, we wonder what can be done to reduce costs and as an employee, we are curious if we are getting the best deal. Medical-insurance costs are rising faster than many companies’ profit margins and outpacing inflation every year.
Rising health-care costs are eroding revenue unlike any other element within a business. Government regulations and rising premiums are also affecting cash flow, which can impact all areas of business operations. Separating rhetoric and marketing from meaningful, impactful companywide solutions is becoming increasingly difficult. However, as the paradigm shift of health-care strategies gains momentum, sustainable solutions are becoming clearer.
There are evolving options with this health-care strategy paradigm shift: traditional, direct contracting, reference-based pricing and bundled pricing. A strong market push for pricing transparency has created additional opportunities for employers to save money and control costs, and they are doing just that. Employers now have the ability to function much like the traditional preferred provider organization (PPO) by negotiating directly with providers.
The traditional approach includes elements such as reinsurance, administration, PPO networks, pharmacy benefit managers, population health management, predictive modeling, multiple plan designs and wellness strategies.
Direct contracting is also a viable option because providers are much more willing to deal directly with employers than ever before. The idea is to establish a delivery and pricing contract that accomplishes two primary objectives:
1) An agreed-upon fee schedule for services performed that is less than typical insurance company PPO-contracted rates.
2) Incentive for participants to utilize contracted providers for needed care.
The third option, reference-based pricing, allows employers to structure partial self-funding plans that reimburse a certain percentage of Medicare reimbursements levels for claims. PPO fee schedules can be up to 200% higher than these Medicare rates. As a result, the reimbursement plan can save employers a considerable amount. However, there is still a risk in balanced billing. The direct contracting option protects employers from balanced billing issues that they would otherwise experience with reference- based pricing methodologies.
Bundled pricing is rapidly evolving and creates a significant opportunity for employers to save money. Employers simply pay agree-upon cash pricing for outpatient surgeries and, in certain cases, inpatient surgeries. The price includes all services including facility, surgeon, anesthesiology, pathology, radiology, etc.
Finally, 2 strategies that are gaining attention regarding prescription costs are average script pricing and pass-through average sales price prescription pricing. Both offer employers opportunities to find significant claims savings.
Health-care costs are rising, and with them, employee-benefit costs. To learn more about strategies to reduce costs while staying competitive with benefits for your employees, contact Summit or go to www.yoursummit.com.