What Questions Should Self-Funded Employers be Asking?

Health insurance continues to be a hot topic of conversation amongst self-funded employers who continue to seek solutions to rising healthcare costs.

Doug Short, CEO of BeniComp Health Solutions, offered his perspective on how employers can self-check their current strategies to cultivate more resilience and sustainability in the long-term. Doug has been a thought leader in the evolution of healthcare for nearly four decades.

The questions below were proposed by Doug to be critical for employers to consider.

Am I focusing on what is driving 80-85% of my healthcare expenditures or am I focusing on the 15-20%?

“Historically, the marketplace has told employers that, ‘claims will be claims.’ In other words, they are unchangeable; they will happen regardless. The claims will be the same from one administrator to another. And that’s just not true. If an administrator is proactive and knows how to control the claims, that could be the biggest savings of the entire plan.”

Doug encourages employers to take a look at the bigger picture of their healthcare expenses by explaining that provider and admin costs are about 15-20% of total healthcare costs while employee healthcare claims make up a whopping 80-85%. And yet, because employers are told that “claims will be claims,” their focus often becomes fixated on trying to shop around for premium or provider discounts and therefore turn a blind eye to the biggest drivers of cost, which is what causes the claims.

“You cannot keep shopping your rates and expect [overall healthcare expenses] to trend downward. This reminds me a bit of someone buying a car based on its cost alone and thinking, ‘they are all the same, so I’ll focus on the price’.  We all know that doesn’t make sense, but that seems to be the way renewal comparisons are done on health insurance.”

How do I control the 80-85%?

Employee healthcare claims are responsible for 80-85% of the total cost of healthcare for employers. The good news is that, while claims are the largest drivers of cost, they can be managed and significantly reduced.

At this point in time, we are breaking free from the historic patterns of negotiating what a claim costs (through networks, disease management programs, pharmaceutical management, etc.). Instead, we are shifting focus toward proactive and preventive strategies that direct our attention to what causes the claims in the first place. This is the mindset that will drive sustainability toward the future of healthcare.

“We need to actually get involved with what is causing the losses. There are certain things that the employer has no control over, and they insure themselves for those. Catastrophic, shock losses, things we don't expect, crashes-- that's what insurance is all about. The thing that is becoming very aware in the marketplace is that 80% of all losses incurred by employees or their dependents are self-caused. Meaning the employee’s lifestyle, sleep habits, exercise habits, what they eat... They play significant roles in what is causing the employee’s claim dynamics.”

The truth is, claim expenditures can be significantly reduced by focusing on what we can control-- lifestyle choices. As an employer, a healthcare plan that incorporates these strategies will empower employees on an individual level and enable a long-term trend reduction in healthcare costs in addition to a healthier and more productive workforce.

I’ve heard, “claims will be claims,” is that true?

Claims will occur regardless, but the belief that the cost won’t change from one administrator to another is simply untrue. There is always a cause as to why the claim is high.

“ ‘Claims will be claims,’ is folklore for [some companies] who are incapable of helping you navigate a solution... If you were to look at what is causing your losses and then get involved into a way of controlling, that has a multiple of effects not only in long term dilemmas like cancer but in the short term realizations like dental, asthma, allergies, orthopedics, etc.”

According to the CDC, 6 in 10 Americans suffer from at least one chronic disease, even though 80% are preventable through lifestyle choices. With 75% of our nation’s healthcare spending revolving around chronic conditions, it is clear that directing attention toward prevention and reversal of these conditions could tremendously reduce the amount that we are spending for healthcare.

Doug illustrates one example of Type II Diabetes which affects nearly 1 in 3 Americans. When unmanaged, it can potentially cost an individual $15,000 - $20,000 per year. When managed, that amount might be $5,000 per year. However, if the correct lifestyle changes are made, costs can be removed completely and what were once regular claims being submitted have now been eradicated.

A knowledgeable and proactive administrator can help control the cost of claims through strategies that focus on a proactive approach and address the root causes. Managing the 80-85% requires forward-thinking and can save employers millions of dollars depending on the size of their company.

How can I get involved, and get my employees personally involved, to address the root cause of seemingly uncontrollable healthcare expenses?

The engagement process begins by ensuring employees are knowledgeable about their health plans and health in general. According to the National Assessment of Adult Literacy, roughly 9 out of 10 adults lack the skills to navigate their health and prevent disease. Nevertheless, knowledge is only half the battle. The challenge then becomes getting people to engage and apply the knowledge.

“We would all recognize portion size, sleep, shutting off the phone to relax is a virtue. There are a lot of people that don't engage that. They might know, but they don't do that. Therefore, the plan needs to start introducing incentives.”

Employers are limited in the extent to which they can get involved with an employee’s personal life and lifestyle decisions. Therefore, working with capable third parties that have a history of measurable success in improving individual health risks becomes an essential strategy.

Look for the health insurance of the future-- plans that engage 96% of an employee population and lower healthcare costs for employers year-over-year. These plans reward and motivate employees to practice preventive health care while protecting the employer from taking on excess risk in the deductible space. A predicted and managed claim costs remarkably less than and explosion. With focus and support in making healthy lifestyle choices, the 80-85% of claim expenditures can be controlled.