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January 23, 2020

4 Cost-Saving Strategies for Self-Insured Benefits Plans

As employers attempt to control skyrocketing health care costs, many businesses (after careful evaluation) have determined that self-funding their employee benefits plan can produce great cost savings.

The following four self-funded plan strategies could be very effective in maximizing those cost savings for your organization.

1. Wellbeing Programs (Health Risk Management) 

60 to 75% of our country’s health care expenses are tied to lifestyle/behavior risks that can be eliminated or reduced by personal decisions, such as exercise, nutrition, compliance with medications, etc. (National Institutes of Health) This fact is good news in that health and the resulting claims can in large part be controlled.

Claims are the largest portion of the costs of a self-funded plan. Therefore, it is critical that you establish and implement a wellbeing program that positively impacts your employees’ wellbeing and, in turn, reduces claims. Your program should address not only physical health but also emotional, financial, social, community and purpose – all of which impact your employees’ physical health.

In addition, ensure that you are implementing:

  • Population Health Programs
  • Large Case Management
  • Chronic Conditions Outreach Programs
  • Lifestyle Coaching

2. Prescription Drug Carve-Out Plans

Prescription drug benefits are an ever-changing and ever-increasing cost to plan sponsors. They make up approximately 20 to 25% of health plan expenses. The outlook for 2022 is a 2 to 5% net spending growth on all prescription medications, with a 1 to 4% growth in retail and mail-order prescription drugs.

As a result, more and more organizations are considering carving out their prescription drug programs. In this scenario, the employer contracts directly with a Pharmacy Benefit Manager (PBM) to administer and manage the pharmacy benefit program.

Advantages

  • Flexible plan design and clinical programs that can help reduce costs
  • Standard language in the PBM contract allows for increased transparency
    • Access to pharmacy claims data
    • Competitive discounts and rebates
  • Annual market check ensures that the rates stay competitive with the current market
  • Service performance guarantees
  • Implementation credits to offset expenses of switching to a new vendor

Disadvantages

  • Multiple vendors for medical and pharmacy
  • If the medical and pharmacy accumulators (deductibles, out-of-pocket expenses) are combined, they will need to be integrated.

3. Dependent Audit

A Dependent Eligibility Audit (Dependent Audit) is the examination of an employer’s health and welfare plan to ensure an enrolled dependent’s eligibility. This process verifies that the dependents identified by an employee are actually eligible to receive benefits.

Obviously, this is a wise move as enrolling ineligible dependents or mistakenly leaving ineligible dependents on the plan drives up the cost of benefits. There is also a legal aspect as every organization is responsible for ensuring that their pre-tax health plan is only paying for eligible claim expenses for eligible plan participants. Typically, the savings achieved by the audit will exceed all audit costs.

4. Claims Audit

Knowing that health insurers frequently make mistakes in processing and paying claims, experts advise employers conduct a claims audit every two to three years. Third Party Administrators (TPAs) and insurance companies are not perfect and will not promise perfection, but it is important to hold them accountable for the claims that are being paid.

There are many areas in which claims processing and payment errors commonly occur, including:

  • Fraud, Waste & Abuse
  • Eligibility & Enrollment
  • Exclusions or Limitations in Benefit Plans
  • Coordination of Benefits
  • Provider Payment Review (hospital and physician discount contracts)

A claims audit will help identify and correct these errors and decrease the chances of future errors occurring.

Final Thoughts

If your business has implemented a self-funded employee benefits plan (or has considered doing so), be sure to consider the four cost-saving strategies in this article. A qualified benefit advisor can guide you on the path to reap the greatest benefits at the lowest cost for your business and your employees.

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