Providing quality healthcare benefits to employees, while controlling costs, has become a major concern for many manufacturers. Although there is no single answer to effectively managing health-benefit costs, there are several solutions that manufacturers can adopt to keep their bottom line healthy.
Consider Moving To Self-Insurance
For smaller manufacturers, self-insurance has always seemed out of reach. The old rule of thumb was that organizations needed at least 300 employees before self-insurance was viable. But this is no longer true. Today, organizations with as few as 50 employees are making self-insurance work.
Although self-insurance is an attractive option, given double-digit fully-insured premium increases, it does involve a higher level of risk. Manufacturers should take a strategic approach that addresses numerous considerations, including benefit plan design, stop-loss coverage, service provider relationships and tight program management to control risk.
Why self-insure? Management flexibility and cost savings are the main reasons. Self-insurance allows an organization to directly manage every facet of its health-benefit program. Every dollar of savings generated drops directly to a manufacturers’ bottom line – not the insurance company’s pocket.
Self-insurance eliminates certain regulatory hurdles that fully-insured companies face. For example, manufacturers with operations in more than one state often face different minimum benefit requirements in each location. Self-insured organizations do not face such concerns and can streamline health-benefits programs across borders. This streamlining can result in lower administrative fees and stop-loss coverage expense.
Learn The Art Of Negotiation
Whether your organization is self- or fully-insured, your plan represents a sizable target for your broker, insurer or third-party administrator. You do have leverage.
But how do you negotiate a better deal? Chances are you are working through a broker. Their commissions are built into your premiums for full-insurance and administrative fees for self-insurance. Ask what their commission was for the previous year and what it will be for the coming year. Do not be shy about asking for it to be reduced.
Self-insured manufacturers also should negotiate performance guarantees for both customer service and claims administration. For claims administration, consider guarantees centered on three issues: financial accuracy, processing accuracy and turn-around time.
Financial accuracy means that all applicable discounts, deductibles, co-insurance and co-payments have been correctly applied to each claim.
Processing accuracy refers to the administrator’s appropriate execution of all internal policies and procedures to process claims. While industry standards for financial and procedural accuracies are 97 percent to 98 percent of claims processed, typical performance rates are between 95 percent and 96 percent.
When considering turn-around time, companies should understand that, while ERISA (Employee Retirement Income Security Act) requires that claims be processed within 30 days of receipt, many plans have negotiated guarantees requiring a set percentage of “clean” claims to be processed within 15-20 business days. In many performance guarantees, manufacturers receive up to a 1 percent rebate of administrative fees for every percentage point that performance falls below the negotiated threshold.
Manage Status Changes
Full and self-insurance service agreements should include language outlining the responsibilities of each party – including the effective management of changes in employee, spouse and dependent status. Unless specifically negotiated, service providers hold no responsibility to ensure accurate plan participant status – they rely solely on information provided by the manufacturer. Some of the significant status changes include effective and termination dates, marriage and divorce, and student or disability status.
Why is eligibility status management important? Cost management starts with limiting benefits to only eligible participants to the plan. For fully-insured companies, incorrect eligibility status can mean higher premiums and over-payments for unauthorized participants. For self-insured companies, illegible status means overpaying administrative charges including stop loss and paying claims for people to whom you should not be providing benefits. Ongoing monitoring to ensure eligibility is a key cost management strategy.
Employ Case Management Programs
For all health benefit plans, a handful of large cases can comprise a significant share of claim expenses. For cases like cancer, diabetes, heart failure or other chronic conditions, case management can lead to cost savings, particularly for self-insured plans. Case management involves early identification of new significant diagnoses, medical case review and treatment development along with provider coordination and negotiations.
Appropriate use of case management eliminates duplicate and unnecessary services while providing ongoing treatment management, which can lead to early condition stability and even recovery. Through case management, manufacturers can provide employees the best treatment solutions while minimizing benefits costs.
Educating plan participants about managing chronic conditions can also lead to savings. For example, when initially diagnosed, diabetes often presents few symptoms. Without effective disease management however, diabetes can lead to heart disease, blindness, amputations and other complications that not only present serious health consequences to the plan participant, but also significant costs to the employer.
A manufacturer can minimize the risk of expensive future complications through nutritional counseling, insulin coaching and other relatively inexpensive educational programs. Similar disease management programs can be implemented for a variety of other chronic conditions. Limited investment in disease management can generate significant savings for the company.
By employing one or all of these four steps, manufacturers can maintain competitive benefit programs for plan participants while controlling health benefit expenses today and tomorrow.
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