Four Points of Value

The US Healthcare system is complex and wrought with waste and abuse. An employer sponsored benefit plan’s participation in this complex & broken system creates financial strain on a business and emotional stress on its employees. Therefore, our common purpose at BCR is to create peace of mind as we prudently manage every aspect of our client’s medical benefit plan.

These are Four Points of Value that we have identified as being critical to the success of an employee benefit plan:


1. Eliminate Pharmacy Waste & Abuse

Most business leaders are unaware that over 50% of most Pharmacy Benefit Manager’s (PBM) revenue is derived from Generic Medication Margin Spread alone. In order to eliminate pharmacy waste and abuse, it is imperative to enhance generic Rx plan transparency. One of the best ways to accomplish this is to work with a PBM who can provide a fee based revenue structure whereas the generic ingredient cost which the PBM receives from the drug manufacturer or supplier, is the cost the plan will pay for generics as a claim. By replacing the variability of average wholesale price AWP in generic pharmacy spending with a capitated fee per employee per month, it creates stability in this area of the pharmacy benefit plan, and drives the cost of generics down at the point of sale.

Another critical area of the pharmacy plan which requires vigilance by your benefits consulting team is the Specialty Pharmacy component. According to the American Journal for Managed Care, in 1990, there were approximately 10 Specialty medicines, while in 2012 that number had grown to over 300. A specialty medicine can be defined as a drug which is designed to fight a specific disease, costs over $600.00 per month, may have limited availability, requires ongoing clinical monitoring, and does not have a generic equivalent. The ACA did nothing to control pharmacy costs for medical benefit plans, which is probably why it quickly passed through the House and the Senate. Unsurprisingly, approximately 40% of the FDA pipeline consists of Specialty Medicines preparing to hit the marketplace. Therefore effective Specialty Medical Plan management can make a dramatic impact on your plan’s loss ratio, and mitigation of high claimant costs will be apparent to your business leadership team during your plan’s annual carrier renewal process.

2. Adopt Reference Based Facility Claim Protocols

The value of a traditional PPO has dramatically diminished, in our opinion, because the employer group has ceased to be the focal point of the relationship. Today’s managed care organizations have two contracts, one contract rarely seen by employers is the contract between the managed care organization and the hospitals who provide services to the employer’s members.

The erroneous discount off of a completely made up billed charge has resulted in a top down managed care approach to claim handling which is not working for American employers. The skyrocketing premiums and agg factors of self-funded plans are a reflection of this reality. Ten years ago a large PPO discount was 30%. Today the same PPO’s discount is over 50%, however, the actual cost of acute claims has dramatically surpassed the discount, and will continue to do so in the future due to ACA lifting the annual benefit maximum and lifetime benefit maximums which had aided in keeping costs down in the past. That coupled with no pre-existing condition exclusion has resulted in the number of million dollar claimants increasing by over 10 times since 2009.

By placing a static payment methodology on variable cost procedures, it allows for greater accuracy in predicting the economic performance of the benefit plan over an extended period of time. Radiology, Lab work, and dialysis are three examples of types of procedures which easily lend themselves to a static payment methodology. However, depending upon the culture of your organization, perhaps a more aggressive approach is in order which would pull Outpatient Surgical Centers and even Inpatient Hospitals into a static payment methodology. The cost savings of this approach is immense, however, the approach may thrust employees into an arena of consumerism which they aren’t prepared for, which means the strategic planning sessions conducted with our client’s leadership team is crucial to executing a step by step approach to reining in the variable costs of the benefit plan which are driving down the company’s share price, while considering the delicate balance of the corporate culture.

3. Manage Chronic Disease & Risk Factors

Disease management is one approach that aims to provide better care while reducing the costs of caring for the chronically ill. Disease management programs are designed to improve the health of persons with specific chronic conditions and to reduce health care service use and costs associated with avoidable complications, such as emergency room visits and hospitalizations.

The purpose of disease management is to educate and motivate members covered by the plan to make healthier choices regarding their treatment plan, as well as their diet and exercise regimen. Properly executed Disease Management, by design, assists those with manageable conditions to remain compliant with their physician’s treatment plan, resulting in fewer inpatient hospital stays and fewer acute care episodes, which results in cost reduction to the benefit plan and fewer stressful healthcare situations for employees and their families.

Compliance with EEOC, ADA, ACA and ERISA are paramount when structuring an effective program. Determining the most appropriate strategy will depend upon a number of factors, with the guiding principle being the corporate culture of the client. Components of a Disease & Risk Factor Mitigation Program designed by BCR include;

POPULATION IDENTIFICATION & MANAGEMENT: Singular or multiple chronic conditions, including asthma, diabetes,
congestive heart failure, coronary heart disease, end-stage renal disease, depression, high-risk pregnancy, hypertension, and arthritis, have been the focus of our programs.

COLLABORATIVE PRACTICE MODELS: BCR programs typically use a multidisciplinary team of providers, including physicians, nurses, pharmacists, dietitians, respiratory therapists, and psychologists, to educate and help individuals manage their conditions.

PATIENT SELF-MANAGEMENT EDUCATION: We feel individuals who are better educated about how to manage and control
their condition receive better care. This usually manifests itself in cost-savings the plan and a better quality of life for the employee’s family. However, members may need additional support to stick to their medical regimen. Counseling, 24-hour call centers, and appointment reminder systems have been used to support individuals who are managing their chronic conditions with success.

OUTCOMES MEASUREMENT & REPORTING: Health plans need feedback from patients and providers in order to evaluate
their programs, so in each quarterly claim review meeting we devote time to evaluating the disease management and health coaching component of the benefit plan.

4. Stop Loss & Alternative Risk Transfer efficiency

BCR has performed as a leader in stop loss medical benefit captives for nearly a decade. What is a captive? A captive insurance company is an insurance company owned by its insureds, which could be one company or numerous companies forming a risk sharing Group Captive. The old adage within the insurance industry which states “If you’ve seen one captive, you’ve seen ONE captive,” is definitely accurate with regard to benefit captives for there are a wide variety of ways to stratify the risk, select the appropriate method of collateralization for the program, and almost countless options when choosing a captive domicile. Depending upon our client’s needs, we can either find an existing captive program, or design and create a new one from scratch.

More traditional methods for ensuring the medical stop loss is being purchased in an efficient manner are to use industry approved options from carrier offerings like level funding, or perhaps an aggregating specific deductible. Other carriers have responded in the past few years with quota share arrangements which allow clients to share in the win for a small percentage of their premium to be returned in good performing years, without assuming additional risk, as one would in pooling risk with others within a Group Stop Loss captive. Multiple Year rate guarantees, or early rate lock in periods can climb as high as 180 days in some cases. The market study we conduct each year for our clients upon renewal will illustrate options we’ve previously considered and discussed in the past or perhaps showcase potential cutting edge solutions which are fresh to the market.

For many years now, according to industry reinsurance experts, roughly 40% of all lasers at renewal, can be attributed to organ transplant risk. To meet the needs of the marketplace, several years ago a few carriers began to market a niche supplemental policy to address this risk. These products are first dollar fully insured coverage, which means for any claimants who may have a new transplant risk arise, there is protection for the plan, and this experience will no longer negatively affect the cost of your client’s benefit plan. The Organ Transplant Policy is a fully insured and pooled product, which means if you make a claim against the policy, your Organ Transplant Policy rates do not necessarily increase. The rates are driven by the performance of the entire pool of OT policy premiums vs claims. Which means for a group’s plan, virtually one or two covered transplant claims in 15 years would more than justify the cost of the coverage in terms of fixed cost premium, however, the soft dollar savings can even more dramatically justify making this decision, once considering the fact the organ transplants do not show up in your plan’s experience, which will keep aggregate factors and fixed cost premium from rising due to these kinds of acute high dollar claims in the plan performance reports which underwriters use to price your future premiums and pick your future estimated claims amounts.

The nature of the Self-Funded Plan Sponsor’s relationship with its plan should be one of a long term nature, and not merely a one year transactional endeavor to relieve a bad renewal offer by an existing insurance provider. We plan and report on a periodic basis, based upon a long term financial strategy approach in 5 to 7 year blocks of time.

According the Karl Pearson, the British scholar who has been credited with establishing the discipline of mathematical statistics, “That which is measured improves, that which is measured and reported improves exponentially.”

“Pearson’s Law” is what inspires BCR consultants to ask our clients three basic questions, “What is your data telling you about how your plan is performing?” “What can you expect in the future if current factors persist?”, and “How are you preparing to make business decisions based upon your plan’s data?”

The answers reside in the “BCR Risk Analysis Process” which both precedes and follows the successful implementation of one, two or perhaps all four of the BCR Points of Value prudent plan management strategies.

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