4/23/2018

1

Presents

Evaluating Health Insurance Cost Containment Strategies for Your OrganizationApril 27, 2018

Agenda

• Funding Arrangements• Network Strategies• Pharmacy Management• Population Health Management• Conclusion

x

• Communications

• Employee morale/response

• Employee engagement

• Employee retention

• Culture

• Workload for HR team

Major Considerations

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2

Funding Arrangements

Funding Options

• Fully-Insured

Low Risk Moderate Risk High Risk

• Level-Funding

• Minimum Premium

• Risk Corridors

• Health Reimbursement Arrangement (HRA)

• Traditional Self-Funding

• Captive Insurance Company

Risk Tolerance Continuum

• Fully Insured

Healthcare Dollars Defined

Fixed Costs (admin, stop loss)

15%

Pharmacy Claims

17%Medical Claims

68%

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3

Financial Components of a Health Plan

VARIABLE COSTS

Employer only pays actual

claims costs, protected by overall liability cap

FIXED COSTS

FIXED COSTS

Employer always

pays full premium, regardless of actual

claims paid

Claim

Expected

claims

Admin

expenses &

stop-loss

Claim corridor

Expected

claims

Admin

expenses &

stop-loss

FULLY

INSURED

SELF-FUNDING

WITH STOP-LOSS

Claim corridor

Reserves/

run-out claims

Taxes Taxes

Reserves/

run-out claims

Cash Flow

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb

Monthly Expense – Fully Insured

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb

Monthly Expense – Self-Funded

Claims Expenses

Self-Funding Considerations

• Cash flow/reserves

• Access to claims data

• Tax considerations

• Full reliance on claims experience

• Additional compliance and administrative burden

• Greater flexibility in plan design and cost containment programs (including captives, Rx carve-out and reference-based pricing)

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4

Captive Insurance

• Employer-created insurance company

• Highly regulated

• Administratively complex

• Potential stop-loss savings

• Risk sharing

• Captive structures

• Multi-employer captive

• Single-parent captive

Captive Layers

$250,000

$75,000

Captive Considerations

• Mandatory or voluntary cost containment strategies

• Heterogeneous or homogenous

• Barriers of entry and exit

4/23/2018

5

Network Strategies

• Narrow Networks

• Reference-Based Pricing

• Telemedicine

• On-Site Clinics

Network Strategies

Fixed Costs15%

Pharmacy Claims

17%

Medical Claims

68%

Broad vs. Narrow Network

• Availability

• Providers included

• Negotiating ability

• Price

• Premium and claim reduction

Out of Network

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6

Reference-Based Pricing (RBP)

• Caps the price for a particular medical service basedon a reference, like Medicare

• Self-funded only using a TPA

• Price comparison to networks

0%

50%

100%

150%

200%

250%

Broad Narrow RBP

% of Medicare

Reference-Based Pricing (RBP)

Where to apply RBP?• All medical services

• Specific services

• Facility-only services

Broad Network

Out of Network

Facilities

Facilities,

Physician &

Ancillary of

Network

Fixed Costs15%

Pharmacy Claims

17%

Medical Claims

68%

Facility

Non-Facility

Facility-Only Reference-Based Pricing

Non-Facility

RBP Does Not Apply to:

• PCP

• Specialists

• Non-hospital labs and

imaging

PHCS or similar network

Broad Network

Out of NetworkOut of Network

Out of Network

Broad Network: Physician &

Ancillary Services Only

Facilities

Facility

RBP Applies to:

• Hospital including labs

and imaging

• Surgery centers

• Dialysis centers

• Outpatient facilities

No network

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7

RBP Prospective With Flexibility

SERVICES PROVIDED

NO BALANCE

BILLING

SERVICES PROVIDED

NO BALANCE

BILLING

SERVICES PROVIDED

NO BALANCE

BILLING

MEMBER GOES TO

ANOTHER

PROVIDER WHO

ACCEPTS RBP

MEMBER GOES TO

PROVIDER; BUT IS

BALANCED BILLED BY

PROVIDER

Reference-Based Pricing Considerations

• Funding arrangement

• Where to apply RBP

• Payment method

• TPA/RBP and stop-loss carrier

• Network’s efficiency for non-RBP services

• Market provider dynamics

• Employee education

• Compliance

Reference-Based Pricing Pros and Cons

Pros

• Lower claim costs

• Lower stop-loss premium/attachment factors

• Lower increases with Medicare

Cons

• Higher costs for non-RBP claims

• Push-back from providers

• Disruption and balance billing for employees

• Employee communication complexity

• Short-term phenomenon

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8

Telemedicine

• Access options

• Providers

• Commonly treated conditions

• Availability

• Vendors

• Plan design and cost considerations

Telemedicine Statistics

10-minute average wait time

13-minute average visit time

92% issues resolved after first call

Utilization is correlated to engagement

Telemedicine Pros and Cons

Pros

• Affordable/low barrier to care

• Convenient, accessible and time-saving

• Effective for remote locations and travel

• Reduction in urgent care and ER utilization

• Reduces absenteeism; improve productivity

Cons

• Reduce care continuity

• No in-person physician interactions including readings

• HSA compliance concerns

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On-Site Clinics

• Providers

• Commonly treated conditions and services

• Access and availability

• Build out vs. pop up

• Plan design and cost considerations

On-Site Clinics Statistics

20-minute average visit time

Average utilization: Year 1 60%-65% | Year 2 85%-90%

Cost range per visit $60-$90 (excluding labs and Rx)

On-Site Clinics Pros and Cons

Pros

• Convenient

• Reduces absenteeism; increases productivity

• Monitors chronic conditions

• Supports a wellbeing program

• Lower lab and Rx costs than insurers

Cons

• Continuity of care with PCP

• May not reduce healthcare costs

• HSA compliance concerns

• May not be available to all employer locations

4/23/2018

10

Pharmacy Management

Pharmacy Cost Containment Opportunities

Fixed Costs (admin, stop-loss)

15%

Pharmacy Claims

17%

Medical Claims68%

Pharmacy Terms/Considerations

• Pharmacy Benefit Manager (PBM)

• Rebates – who keeps them and what percentage?

• What is dispensing cost?

• Who determines the ingredient costs?

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11

Pharmacy Management Programs

• Mandatory mail order

• Step therapy

• Quantity limits

• Restricted formulary

• OTC exclusions

Pharmacy Management Programs

• Pharmacy rebate and discount evaluation

• Medical channel management

• Specialty carve-out

• Couponing/web-based discounts

PBMs’ Hidden Profit

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12

Value of 100% of Rebates

Specialty Spend

2014 Actual 2020 Projected

Traditional Pharmacy Benefit Specialty Pharmacy Benefit

68%

32%

50% 50%

Medical Channel Management and Specialty Carve-Out

Channel Management

• How do members access specialty pharmacy?

• Do specialty drugs go through the medical plan?

Specialty Carve-Out

• Does the PBM own the specialty pharmacy?

• Who retains specialty rebates?

• What volume of approvals are you experiencing?

4/23/2018

13

Hepatitis C per Rx

Couponing/Web-Based Discounts

• Coupons from prescribing physician• Good for covered and non-covered prescriptions

• Web tools such as GoodRx, Milligram and BlinkHealth

Example: Zetia (cholesterol-lowering medication)• Carrier discounted price - $300

• Employee copay - $60

• Online discounted price - $24

• $36 x 12 = $432 annual savings for employee

• $240 x 12 = $2,880 annual savings for employer

Pharmacy Management Pros and Cons

Pros

• Potential savings to employees and employer

• Enhanced compliance with treatments

Cons

• Increased employee communication and education

• Disconnect from underlying medical plan

• Disease management coordination

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Population Health Management “Big Data”

Deeper Dive with Data

Predictive Modeling

Analysis by• Provider• Location• Program

Engagement• On meds vs. not

Chronic Condition Control

Impact of programs

Medical and Rx claimsUtilization Reports

Biometrics

Site of Care

Traditional data reporting

Data analytics and Consulting

Uses of Big Data

• Development of top tier networks

• Structure plan design to promote compliance

• Adjust formulary to restrict access

• Determine population health programs to implement

4/23/2018

15

Conclusion

x

• Communications

• Employee morale/response

• Employee engagement

• Employee retention

• Culture

• Workload for HR team

Major Considerations

x

Ken Liberatore

Vice President, Paradigm Group

kenliberatore@paradigmgroup.net

Edward Rittenberg

Principal, Paradigm Group

edwardrittenberg@paradigmgroup.net

Questions?