Once seen as a bolt-on to major medical coverage options, health plans that use reference-based pricing (RBP) have steadily gained in popularity as employers continue to battle rising health care costs for their businesses and employees.
In fact, most companies are missing out on major savings when they don’t review self-funded health plan options. Not only are they a great way to reduce costs and improve benefit delivery, but they are also at the center of some major evolutions in medical insurance plans that put company leaders in the driver’s seat when it comes to managing spend.
The RBP Basics
I always tell my clients there really is no right or wrong way to set up a health benefits program. The real question is always – how do you want to pay health insurance bills? Do you want to pay retail rates or wholesale rates?
The answer is almost always wholesale, because who wants to pay inflated rates that someone else controls and that’s the door opener for an easy switch to self-funded plans. Self-funded benefit plans are designed to keep you in control of your checkbook. Using what is known as reference-based pricing, you can set spending limits and make sure you don’t overpay hospitals and doctors.
By definition, reference-based pricing is a health plan strategy where the employer sets a ceiling on the amount it will cover for a procedure rather than having the provider determine the cost. Providers are then asked to accept the RBP payment, or provide justification as to why their fees exceed reasonable and customary charges.
Medical claims are still going to happen, but how you pay them makes all the difference. With a self-funded plan you can used reference-based pricing to determine how much you pay hospitals and doctors for services.
Here are quick definitions to simplify things:
Reference-Based Pricing (RBP) uses a medical service pricing baseline set by the government, typically Medicare. This baseline establishes a reasonable and customary price for medical services. Then, RBP pays about 30% to 50% above that baseline price, and most providers are happy with that negotiated payment rate.
Balanced Billing is the bill you receive for any medical costs not covered by your health insurance plan. In many cases this bill for the balance of your medical costs occurs when a provider has declined to accept the negotiated RBP amount.
When you select from the list of chosen providers in your network, you can get two things – a list of providers known to deliver the best quality care, and providers that have agreed to deliver medical services at negotiated payment rates, which means you won’t receive an extra bill.
For company leaders and HR managers worried that self-funded plans will be hard to manage or confusing for employees, I have great news. Self-funded plans have evolved quite a bit and there are a number of new ways companies are managing and outsourcing key components of benefit plans that not only save money but cut a huge chunk of the workload out for HR.
Out With the Old, In With Better
A self-insured plan is nothing more than project and money management and that management can be done easily by advisors, brokers and third-party vendors who handle the work for you.
Custom Fit
Self-funded plans are also highly customizable. Gone are the days where you have to pick from the two or three packages a large insurance company offers. Now plans can be customized to meet the needs of the employer and employees. You can offer strictly basic coverage through a MEC plan, or offer full coverage only for c-suite leaders while still offering employee plan options with high deductibles or you can create a full menu of plans at all premium and coverage levels and still save time and money.
Insurance companies sell products. Advisors come in and determine the budget for your annual health care spend, determine how conservative or aggressive you want to be with what you offer to pay doctors and hospitals and create a custom plan that outsources the workload while still offering key benefits like a flexible, broad network of providers.
Steerage
Another great development in health benefit plan management is the concept of steerage. Those seeking medical care under a plan are steered towards providers who not only agree to pay at reference-based pricing levels, but also have a track record for better outcomes. These Centers of Excellence (COEs) are easily identifiable and can even be flagged specifically by procedure type, such as knee surgery, cancer treatment or birth.
Data
Underpinning most of the new trends in self-funded plans is the ability to more easily and accurately gather data that can then be used to find the best rates for care and the best outcomes for patients. Advances in data collection and analytics also means you can learn more about the spending patterns within your employee base and better pivot to options that keep costs low but don’t reduce the quality of benefits.
Automations
One of my favorite trends in health insurance plan management is automations. With the right systems in place, you can be proactive with health benefit management, improve the benefit experience for employees and stay far ahead of surprise costs. You can benefits communication, for example, and send helpful plan benefit messages to employees throughout the year, instead of just during open enrollment. You can flag costly prescription drugs and help find high-dollar prescriptions at lower prices and even for free. You can create a ticketing system for any balanced billing or medical claims issues. If, for example, an employee receives a bill for medical care that fell outside of their coverage limits, they can submit a ticket and a third party can review and resolve the claim without HR having to get involved.
Management
At Shenandoah Valley Group we can automate almost all aspects of plan management. We set up a system that not only communicates health benefit information to employees, but acts as the hub and portal for medical claims, balanced billing, prescription drug plan access and more. This eliminates concerns about making a switch to self-funded plans and companies can begin to realize as much as a 50 percent savings in year-over-year benefit costs, not to mention a significant workload reduction.
With the rapid advancement of technology, companies have the advantage. Predictive analytics, leveraging data and a wider acceptance of reference-based pricing makes it much easier to convert to self-insured options or add those to the menu of benefit plans offered and improve the bottom line and employee satisfaction.
If you would like to learn more about self-funded plans, grab some time on my calendar. I start with a discovery session with clients and even if you aren’t ready to switch, you will at least learn more about your options. I look forward to helping you gain better control over your money.