Self-funding your health benefit plan can be rewarding for employers. Yet experts say common pitfalls still undermine too many employers’ best efforts.
The experts who compiled this list of 10 avoidable self-funding pitfalls are:
- Sharee Bowsher, regional sales executive, Serve You Rx, a pharmacy benefit manager (PBM) based in Milwaukee.
- Debra Echlin, Pharm.D, CGP, Director, Clinical Programs, Serve You Rx.
- Jayne Feagles, regional sales director, for Auxiant, a third-party administrator (TPA) based in Wauwatosa, WI.
- Joseph Holt, vice president, sales and marketing for Auxiant.
- Melina Kambitsi, Vice President, Business Development and Member Services, The Alliance
Auxiant and Serve You Rx are partners in Single-Source Self-Funding™, a program developed by The Alliance to help employers successfully use self-funding while avoiding these potential problems.
Two pitfalls can occur when you limit your vision about what self-funding can do.
Looking at Self-Funding as a Short-Term Solution
“Employers considering self-funding should plan to be in it for the long haul,” Bowsher notes. Self-funding gives you information about employees’ health and well-being that makes it possible to target specific issues. It can take months or even years for these strategies to pay off, so only employers who are committed to self-funding will reap the benefits. Talking to other self-funded employers can help you understand what challenges may lie ahead. Your benefit adviser and vendor partners can also help.
Failing to See the Big Picture
Employers can be discouraged if efforts to urge employees to take medications for chronic conditions like asthma or high blood pressure cause pharmacy benefit costs to rise, for example. But before starting to worry, Bowsher suggests that you check the impact on your medical plan, where lower expenses for emergency care, urgent care and hospital admissions can produce savings that far outweigh additional medication costs.
Deal With Devilish Details
Four pitfalls are linked to overlooking important details. Kambitsi pointed out that Single Source Self-Funding handles all four.
Lack of Coordination between Your Medical Plan Language and Stop-Loss Policy
Unless you’ve coordinated your medical plan language with your stop-loss policy, there can be gaps in stop-loss coverage. These gaps can be costly, Feagles said. She offered the example of an employer with a handbook policy that allows an enrollee on a leave of absence to have an extra 30 days of health coverage after they exhaust their paid time-off, vacation time or family medical leave. If that information is omitted from the plan document, the stop-loss policy won’t cover it. And if the enrollee has an expensive health crisis during those 30 days, the employer could end up paying for high medical costs that would otherwise be covered by stop-loss insurance. Feagles adds that requiring employees to rely on COBRA to extend their health coverage would be a better way to avoid this problem.
Publishing an Employee Handbook without Review by an ERISA Attorney
ERISA rules govern self-funded health plans. Unfortunately, as human resources staff turnover occurs, new human resources employees may not realize the impact of handbook changes or the need to seek out ERISA experts. “It’s important to coordinate what’s in the handbook – such as when COBRA coverage begins – with what’s in your health plan,” Feagles said.
Multiple Vendors Working at Cross-Purposes
If you add specific language to your medical plan to address emerging problems, make sure you alert all your vendors. Holt offered the example of an employer who used the medical plan document to restrict off-label usage of prescription drugs, which means the drug is prescribed for conditions other than those approved by the Federal Drug Administration (FDA). If the PBM is unaware the employer bars covering off-label usages of prescription drugs, or lacks a process for flagging those claims, the claims may be approved anyway. This mistake cost one employer more than $100,000 as part of a single patient’s care.
Going without Reports that Help You Integrate Data
The data you gain from a self-funded health plan can help you make important decisions about coverage levels, care management and other issues. But these reports can be difficult to interpret when each vendor offers a separate report, and some vendors may not give you any reports, Holt said. Many employers give up and try to move forward without reports. Single Source Self-Funding integrates reporting from the TPA, PBM and network so employers get information that allows them to take action.
Enrollee Communication Matters
Want employees to appreciate their self-funded health benefits? Start by avoiding this big misstep.
Hoping Employees Will Figure It Out from a Single Handout
Employers often launch programs that offer services like telemedicine, steerage or care management to employees, but then fail to regularly remind employees and their family members about their options. “Enrollees have to understand what the program is and what it means to them,” Feagles said. Some employers refuse to do anything beyond sending out handouts when the program is launched, and then blame the program for failing to engage enrollees. Instead, employers must be willing to share information on an ongoing basis, including who to call when problems arise. “Put a little effort into employee communication and it will certainly pay off,” Feagles adds. That’s why a consistent approach to ongoing enrollee education – and a single contact number for enrollees – is built into Single Source Self-Funding.
Use Financial Incentives Wisely
Two common pitfalls are linked to plan design, which is critical to saving on the cost of care through self-funding. Single Source Self-Funding’s plan design handles both.
Designing Incentives with Unintended Consequences
Increasing enrollees’ out-of-pocket costs can reduce spending, but Holt warns that there is a point of diminishing returns. “People will avoid care because they can’t afford the out-of-pocket cost,” Holt said. “When you make a consumer say, ‘I can’t afford $600 a month for the prescription so I’ll stop taking it,” you can turn what would have been an $8,000 claim for the year into an $80,000 claim because of complications.” Good reports can help employers make plan design changes that drive the right enrollee behavior, like choosing urgent care over the emergency room, or having an MRI at a low-cost, high-quality clinic.
Ignoring Value-Based Benefit Design (VBBD)
Echlin notes there is evidence that patients with some types of chronic conditions – such as diabetes, high blood pressure and asthma – have lower overall health care costs when they take medicines regularly and comply with other medical recommendations. VBBD typically reduces patients’ share of costs for medications used to manage these conditions. Echlin said three tactics increase the likelihood of a positive return on investment (ROI) from VBBD:
- Know your population through conducting preliminary analyses and modeling;
- Coordinate programs across your health plan, including the PBM, disease management vendor and other key players;
- Develop an enrollee communication plan that emphasizes program benefits to patients and providers.
Make a Plan
The good news is that all nine pitfalls are avoidable. Kambitsi pointed out that Single Source Self-Funding identifies common pitfalls and builds in solutions. Brokers must be certified to offer Single Source Self-Funding so they are equipped help employers use self-funding effectively.
Single Source Self-Funding also provides full transparency on compensation, costs, claims and reports. “There’s total transparency in all aspects of the health plan,” Holt said.
The key is to anticipate problems and develop solutions before trouble arises.
“Employers can set themselves up for success with the proper planning,” Bowsher said.
Otto-McLeod manages Single Source Self-FundingTM, the QualityPath® initiative and other programs. Her role also includes researching and developing new products and services that support the mission of The Alliance.
Before joining The Alliance in December 2014, Otto-McLeod was director of sales, product development and marketing communications at WEA Trust. Earlier positions include director of health care initiatives at THRIVE; manager of group retention at Dean Health Insurance; and manager of group services at Physicians Plus Insurance Corp.
Otto-McLeod has an executive master of business administration degree from UW-Madison and a bachelor’s degree in business administration from Cardinal Stritch University. She is a certified employee benefits specialist (CEBS) and holds licenses in health and life insurance.
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