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August 26, 2019

7 Tactics for Employers to Control Rampant Health Care Claims Costs

On average, approximately 90% of an employer’s health insurance spend goes to claims costs. Yet far too often employers focus on controlling the 10% - costs such as administrative fees, wellness programs, etc. Substantially greater savings can be achieved if employers targeted the 90%.

So, what’s your strategy going to be?

Here are seven tactics to control rampant health care claims costs to consider:

  1. Refuse to sign blank checks to the health care industry.

Within the health care industry, claims can be costly for a myriad of reasons, for example, an accurate but expensive treatment that may have much lower costs elsewhere in the supply chain, a claim wrought with errors and duplicative charges or an “upcode” in which a health care entity bills for claims that did not happen. In any of these examples, the employer is utterly unaware and therefore helpless in reigning in these costs. By focusing of payment integrity and accuracy of medical claims, as well as helping guide members to the “efficient” (the intersection of the highest quality and lowest cost) providers, employers can avoid wasteful spending on care delivery. 

Cost-savings can also be achieved by better understanding and negotiating your PBM contracts. Find out how here.

  1. Avoid reckless plan document language that costs millions.

Does the health plan document allow for negotiation? Does the stop-loss policy match services and coverage with the health insurance administrator’s contract? Are there provisions in the plan document that allow the ability to audit medical claims for accuracy and consistency? By creating a plan document specific to a health plan’s unique details, employers can avoid millions of dollars in risk.

  1. Have specific plans for uncommon and costly claims.

Dialysis, cancer care, transplants, hemophilia, major musculoskeletal surgery and a handful of other conditions are both rare and costly. By having plans that adequately address the cost and quality of treatment for these conditions, employers can be shielded from wild variance in both cost and quality. In addition, these plans have a positive impact on stop-loss insurance.

  1. Deploy evidence-based musculoskeletal management programs.

Ensuring that back and joint pain are properly diagnosed and conservative treatments are applied is the first step in avoiding unnecessary surgery. Working only with health care professionals who apply evidence-based, proven applications for musculoskeletal conditions and who do not suggest surgery unless absolutely needed protects both the patient and the health plan from costs related to ineffective and unnecessary invasive procedures.

  1. Insist on value-based primary care.

By taking ownership of the health care supply chain’s origin point, primary care, employers can control the referral patterns to higher quality, lower cost outcomes by developing a relationship with a panel of primary care physicians. Additionally, by restructuring how patients engage primary care, a higher percentage of expense can be sourced at the lowest cost sites of care. This mindset can be achieved through deployment of direct primary care, onsite or near-site health centers or via the use of a clinically integrated network.

  1. Protect employees by sending them to providers with first-rate medical quality records.

To combat having unmitigated access to underperforming providers, employers are increasingly contracting for services with doctors and health systems directly. Accountable Care Organizations (ACOs) are groups of doctors, hospitals and other providers that come together voluntarily to give coordinated, high-quality care to their patients.

Centers of Excellence (COEs) are highly rated facilities shown to offer high-quality, cost-effective care by specializing in specific diseases or conditions. They can benefit organizations financially by increasing efficiencies, while providing better clinical outcomes for employee-patients through reductions in readmissions, proper diagnosis and other quality of care metrics for their particular specialty.

Interested in learning more about COEs and provider medical quality? Click here.

  1. Proactively manage pharmacy benefits.

There are many existing and emerging strategies to manage pharmacy costs pharmacy costs – some more aggressive than others. These approaches include, among others:

  • Negotiating a better Pharmacy Benefit Manager (PBM) contract
  • Carving-out pharmacy benefits services to a third party
  • For specialty and other high-priced medications and treatments, international pharmacy and medical tourism
  • Alternative funding markets/advocacy-based programs that remove the drug from the health plan and alleviate the member’s cost for the drug. 

For additional cost-saving strategies and a deeper dive into the overall state of health care in 2019, check out this guide.

While on the surface it may seem that there is not much an employer can do to control health care claims costs, there are indeed many effective tactics that can be deployed. The seven aforementioned strategies have proven successful for many employers. However, rather than diving right in, it is advisable to partner with an experienced benefits advisor who can help you determine the best combination of strategies for your unique organization.

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