What Is Reference Based Pricing?

Shawn Fried, PMP

In the never-ending quest to decrease employee benefits spending on healthcare, some employers are turning to a somewhat revolutionary concept called reference based pricing. This switch is most common among large employers (500 employees or more) who are self-funded, and is gaining popularity rather quickly. For those who may be interested in implementing such a program, it’s important to understand how it differs from traditional healthcare plans, as well as how it will affect those enrolled in it.

What Is Reference Based Pricing?

Reference based pricing (RBP) is a system that some employers have started to use for cost containment purposes. This method is different from more traditional pricing options in that the employer caps the amount they’ll agree to cover for certain non-emergent medical procedures that can vary greatly in price yet not in outcome, such as hip or knee replacements.

Read More
Topics: Employee Benefits, Cost Containment, Education, employers

Related posts

The Effect of Chronic Conditions on Employer and Employee Healthcare Costs

Dr. Christine

It seems like the only thing we can talk about these days is the rising cost of healthcare. Whether it’s in the news or in the boardroom, healthcare costs are a major topic of conversation — and with good reason. Healthcare costs have been increasing for decades with no apparent end in sight. There are many differing opinions on how exactly to decrease costs and even more debate as to the cause behind them. What is the reasoning behind the drastic increases?

While that question may have many answers, one of the most impactful is the effect of chronic conditions, which require constant care from medical professionals. Chronic conditions range in severity and attention needed to manage them, which can dramatically affect the healthcare costs associated with them.

A recent study by the RAND Corporation, a nonprofit, nonpartisan research organization committed to making “the world safer and more secure, healthier and more prosperous,” looked into chronic conditions in the United States and their effect on healthcare costs. Their findings were both surprising and disheartening — but they do help explain at least one reason why overall costs are increasing so dramatically.

What Is a Chronic Condition?

A chronic condition is an illness that lasts for a prolonged period, but most definitions do not specify an exact period of time. For the purposes of the RAND study, they defined the term as a “physical or mental health condition that lasts more than one year and causes functional restrictions or requires ongoing monitoring or treatment.”

By this definition, we could assume that the term “chronic conditions” includes ailments such as heart disease, high blood pressure, asthma, anemia, diabetes, arthritis, cancer, and mood disorders, among many others.

What Causes (and Contributes to) Chronic Conditions?

According to the CDC (Centers for Disease Control), there are four major health risk factors that “cause much of the illness, suffering, and early death related to chronic diseases and conditions.” They are:

Read More
Topics: Employee Benefits, Cost Containment, Education

Related posts

Containing Employee Benefit Costs Through Value-Based Insurance Design (VBID)

Shawn Fried, PMP

As the cost of healthcare continues to rise with seemingly no end in sight, employers of all sizes across the entire country are looking for ways to cut costs without compromising the quality of care. Many employers have already moved toward consumer directed healthcare, but another strategy some employers are turning toward is value-based insurance design (VBID).

While value-based insurance design is far from a topic discussed at the dinner table, it isn’t a new concept. In fact, one state adopted this plan design in 2008 and some principles of VBID, such as low-cost preventative care and wellness visits, were incorporated into Section 2713 of the Affordable Care Act (ACA).

VBID takes a very different approach than HDHPs (high deductible health plans)  when it comes to trying to save employers and employees money, so if you’re thinking of making a change to your employer-sponsored health insurance, it’s important to understand exactly what you’re signing yourself (and your employees) up for.

What Is Value-Based Insurance Design?

Value-based insurance design is a cost containment strategy being adopted and tested by some employers. This plan structure is different from traditional health insurance plans in that its purpose is to decrease costs for medical services deemed as “higher value,” while increasing costs for those considered to be “low value.”

Read More
Topics: Employee Benefits, Cost Containment, Education, Plan Design

Related posts

Why Your Cost Saving Strategies On Employee Benefits Are Failing

Jeff Griffin

As the third or fourth largest line item on most business’ profit and loss statements, employee benefits have been under pressure for years. Rising costs have impacted both employers and employees, but cutting benefits or pushing more of the financial burden onto employees will only exacerbate hiring and retention struggles. And as employers have figured out by now, relying on a once a year negotiation with their medical carrier is by no means an effective or sustainable way to curb costs.

While putting all your eggs in one basket by attempting to contain employee benefits cost via an annual renewal negotiation is still more mainstream than the exception, employers would realize far more sustainable savings if they sat down with an employee benefits broker who is dedicated to year-round cost saving strategies. Additionally, renewal negotiations, which are still very much a part of cost containment, should not only be focused on price, but also on the multitude of contractual issues which, when thoroughly reviewed, can yield substantial cost savings.

The three areas we consider of greatest importance to sustainable employee benefits cost savings are 1) wellness through the identification and management of chronic conditions within an overall health plan, 2) high-dollar claims intervention, and 3) the effective purchasing of healthcare in the open market.

Wellness Through the Identification and Management of Chronic Conditions

When designed effectively, with targeted population health data to guide the way, wellness programs can be very effective in bringing down the overall cost of your employee benefits program. But wellness programs should not be solely focused on modifying behavioral health patterns such as smoking, lack of exercise, and poor eating habits. In fact, by promoting age appropriate screenings, preventative care participation, and medication adherence for chronic conditions, wellness plans can really pay off in the long run.

Chronic conditions such as hypertension, high cholesterol, diabetes, depression, back pain, and heart disease represent a significant risk for an overall health program. These conditions present challenges in direct medical expenses as well as indirect costs such as lost productivity and absenteeism. In our experience, members with chronic conditions typically make up 25 percent of the overall population, but are responsible for 75 percent of overall healthcare spending. Programs geared towards disease management, medication/standard of care adherence, and unidentified conditions present the greatest opportunity for cost containment and large claim mitigation in employee benefits programs.

Read More
Topics: Employee Benefits, Cost Containment, Education

Related posts

How to Improve Employee Medication Adherence & Why It’s Critical To Your Benefits' Budget

Jeff Griffin

When working on cost containment solutions, many employers completely overlook a critical component that could secretly be costing them tens of thousands of dollars: medication adherence. Medication nonadherence is associated with a higher rate of hospitalization (and at a higher cost) than those compliant with their medication regimen.

It seems simple enough — people are prescribed medications and they take the necessary doses, right? Well no, not necessarily. Medication adherence is a complicated topic with multiple, unrelated causes that are difficult to pinpoint and treat. And unfortunately, this problem doesn’t actually have a simple solution. But nonetheless, it’s important for employers to understand what it is so they know how they can help — and how it affects their budgets.

What Is Medication Adherence?

Simply put, medication adherence is when patients properly follow directions for taking medications as written by a doctor or pharmaceutical company on the label. For example, many over the counter pain medications allow for one or two pills to be taken every four to six hours, but never more than so many in a 24-hour period. Some asthma medications require once daily doses, while others require two (morning and night), and others require four (two in the morning and two at night). In addition, many blood pressure and cholesterol medications are taken once daily.

Some medication requires a change in diet (such as avoiding certain foods, like grapefruit, which can counteract the drug) or have strict instructions on how to take the medicine, like not eating for a certain period of time after consumption. Many times, these food restrictions have to do with a body’s inability to absorb the medication or vitamins if certain foods are present in the patient’s system.

According to the Centers for Disease Control (CDC) there are three different forms of medication nonadherence:

Read More
Topics: Employee Benefits, Cost Containment, Education, Behavioral Psychology, employee health, Pharmacy

Related posts

How To Engage Employees in Consumer Driven Healthcare

David Rook

For any employer hoping to contain employee benefit costs, workforce adoption of high deductible health plans (HDHPs) is almost always a critical component these days. Yet this flight to what’s become known as “consumer driven healthcare” comes with a duty to help the workforce become savvy shoppers of healthcare. As the traditional decision makers in this area, employers must keep in mind that many employees will feel overwhelmed with this new responsibility.  If fact, many experts already feel as if we are failing as a nation when it comes to this concept of healthcare consumerism.

Never before have employees had to care much about whether a prescription was brand name or generic; they just had a copay. Maybe that copay was more expensive for the brand name drug, but it was manageable in comparison with paying the full retail price. They also never had to pay more than a copay for a doctor visit, but now they’re on the hook for the whole bill (at least until they reach their deductible). It’s understandable that many people feel confused and frustrated by this change in benefits.

This is not, however, an impossible transition. With more and more companies shifting to HDHPs every year, the education challenge is widespread. Engaging employees in the decision making process will empower them to feel as if they can make good decisions on their own — instead of expecting their employer to do it for them. With some education and a little assistance from your employee benefits broker and internal communications team, employees can gain the confidence they need to control their healthcare spending. Here are a few things employers can do to engage their employees in consumer driven healthcare.

Read More
Topics: Employee Benefits, Cost Containment, HSAs

Related posts

If You Aren’t Offering Voluntary Benefits, You're Missing Out

David Rook

When building a comprehensive benefits package, many business owners are (understandably) grateful just to be able to offer medical coverage. But some employers also tend to leave out voluntary benefits, which can enrich the employment experience and be a helpful recruitment tool for potential employees — all at little or no cost to the employer. If voluntary benefits are outside your purview, check out this quick-reference guide to fill in the blanks.

What Are Voluntary Benefits?

While the definition of voluntary benefits has become somewhat blurred over the years (and are sometimes referred to as worksite benefits or even ancillary benefits) they are, for the most part, insurance products meant to fill in healthcare gaps where health, dental, and vision insurance might not reach, and can increase the value of your employee benefits package. Typically, voluntary benefits are paid in full by the employee and made easy through payroll deductions — most of the time at a lower rate than what can be found on the individual market and frequently taken out of wages pre-tax.

Common examples of voluntary benefits include:

  • Accident Insurance: Provides compensation to employees if they suffer major physical harm due to an accident. Some insurance policies even reimburse employees for seeing their doctor a couple times per year.
  • Critical Illness: Provides a lump sum to enrollees in the event of a critical illness (such as a heart attack or stroke) which can be used to pay medical or non-medical expenses (like child-care) while an employee is unable to work.
  • Cancer Insurance: In the event of a cancer diagnoses, an enrollee receives money with which to pay for treatment and sometimes, to help pay non-medical expenses.
Read More
Topics: Employee Benefits, Cost Containment, Plan Design, Voluntary Benefits

Related posts

Employee Benefits Issues Facing Arizona Employers

David Rook

While employers across the country are battling the rising cost of health care, Arizona employers are facing unique challenges of their own. Arizona’s border with Mexico presents unique circumstances many states don’t encounter, and certain state laws have created a challenging environment for employers to cultivate meaningful employee benefits packages. Here are four issues Arizona employers are facing in 2017 when it comes to employee benefits:

Arizona Employee Benefits Issue #1: Lack of Exchange Options

For small businesses with fewer than 50 full-time equivalents (FTEs), offering a SBHRA (Small Business Healthcare Reimbursement Arrangement) can be a challenge. Taking advantage of newly passed legislation regarding SBHRAs should generally help small businesses with recruitment and retention — however, the lack of Exchange options in Arizona is likely to frustrate employees, rather than appeal to them.  

This lack of Exchange options means competition is virtually non-existent, which generally leads to higher healthcare prices. Of course, this means employees are having difficulty finding affordable healthcare that fits within their budget, leading some employers to feel obligated to increase the amount they offer via SBHRAs.

Read More
Topics: Employee Benefits, Cost Containment, HSAs, Arizona

Related posts

5 Ways to Help Employees Embrace High Deductible Health Plans (HDHPs)

David Rook

Many employers are making the move from traditional healthcare plans such as HMOs, POSs, EPOs, or PPOs, to high deductible health plans, commonly referred to as HDHPs. Employers find that HDHPs allow them to save on premium costs while at the same time encouraging workers to become more active and educated consumers of healthcare. Some companies might offer HDHPs as one of two or more medical plan options, although this strategy does them little good in terms of saving money if the majority of employees fail to adopt an HDHP plan.

Regardless of the options employers choose to offer, consumer-driven healthcare is on the rise and high deductible health plans aren’t going away anytime soon. As they continue to become more and more prevalent, it’s important for HR to step up their communication efforts. Employees will be (understandably) concerned and confused by the differences in HDHPs, but it’s nothing education, patience and a bit of behavioral economics knowledge can’t solve to ward off buyer's remorse. Here are some ways to help employees embrace high deductible health plans.

1. Communication is Key

As with any other change in your company, you must be very explicit and intentional in your communication. Remember that people like to have explanations for what is happening (and why), rather than have changes dictated to them without any kind of supporting information. Just remember Benjamin Franklin's oft-cited adage "Tell me and I forget, teach me and I may remember, involve me and I learn."

When introducing a HDHP, it's critical to hold an active (vs. passive) enrollment. It's also smart to hold an open enrollment meeting so your employees can ask you questions - just make sure they’re prepared for it by sending out the benefits information a few days prior to presentation. In this way, they'll have time to review the information and come prepared with any questions they might have. Be as candid as possible so they feel as though you’re understanding their concerns - and do your best to be as patient as you can to assuage their fears. This course of action will go a long way toward a smooth transition.

2. Educate Employees about How High Deductible Health Plans Work

If your employees have never been enrolled in a high deductible health plan before, they’ll have plenty of questions about how they work. Why aren’t there copays? How much does an office visit cost at the doctor? What if one of the members on the plan is seriously injured? For what type of person are HDHPs most appropriate? Although HDHPs are growing in popularity among employers, employees tend to know very little about them and therefore, shy away from them.

Read More
Topics: Cost Containment, Employee Engagement, Education, HSAs

Related posts

The Pros and Cons of High Deductible Health Plans (HDHPs)

David Rook

The healthcare landscape looks quite different than it did 20 years ago. In the 1990’s, getting decent health insurance through your employer wasn’t unheard of — it was assumed. But back then, healthcare wasn’t nearly as expensive; rates have increased every year for nearly two decades and it’s unlikely they’ll reverse course anytime soon.

In order to afford health benefits for employees, many businesses have had to restructure their offerings, causing a rise in the popularity of high deductible health plans (HDHPs). In 2015, nearly one-third of large employers chose to only offer high deductible health plans to employees and over 80 percent added HDHPs to their list of health insurance offerings.

Because HDHPs don’t seem to be going away anytime soon, it’s important that all business owners and employees familiarize themselves with how these plans function.

The History of High Deductible Health Plans

Healthcare costs began to increase noticeably (and more consistently) around the year 2000. In 2009, the Kaiser Family Foundation reported a 131 percent increase in family premiums (105 percent for individuals) over the previous decade. Since then, premiums have continued along the same path. Between 2009 and 2013, family and individual premiums each increased about 78 percent — with no realistic end in sight.

In the early 2000’s, as health insurance prices increased, businesses providing healthcare for employees began looking for ways to save money. At that point, high deductible health plans were few and far between, but some companies picked them up, believing that it was their best option.

Read More
Topics: Employee Benefits, Cost Containment, Plan Design

Related posts

Subscribe for New Blog Post Notifications

Free_White_Paper_Employee_Benefits_Branding
Free_White_Paper_Private_Exchange_Employee_Benefits
Free_White_Paper_Employee_Benefits_Branding
Free_White_Paper_Employee_Benefits_Hospitality
Free_White_Paper_Improving_Employee_Benefits_Communications
Free_White_Paper_Employee_Benefits_Construction
Free_White_Paper_Employee_Benefits_Branding