How to ut Health Care costs by over 40%

Case Study: Printing Money

Monday, February 24, 2020

In the fall of 2018, a 300 employee industrial graphics and printing business was referred to our team to help take back control of their health plan. Over the course of the next 12 months, the client realized a reduction in health care spending of over 40%, or about $4,000 per employee per year, without watering down their benefits design. Here’s how…

Prior to meeting us:

2013-2018 were rough years for their health plan. Overall their costs had increased over 50%, even after the following changes:

  • Adding more plan design options, introducing HMO networks, and even HSA plans
  • Increasing deductibles to as much as $5,000
  • Shifting premium costs to Employees
  • Changing insurers (twice) to try to avoid the increases.

This client had previously enjoyed a fairly stable plan, with increases of less than 8% per year on average, but realized that things would need to change to avoid further negative impact to their employees.

Our initial meeting:

Our initial meeting had a typical start. We asked the client why they invited us in, and their response was along the lines of “we want to look at a new broker to get better rates to reduce our health insurance costs.”

This is a pretty typical for most buyers of healthcare, so we broke-out their costs into several main categories to facilitate our conversation.

  • We asked the client initially, which number they would like to control, the yellow number, the blue number, or the green number.
  • Anytime this client mentioned something like “Well if we change brokers, that will lower costs,” we would reference the number to say “It may change the blue number, but not the yellow number.”
  • If they mentioned something like changing insurers, we reminded them it would influence the green number, not the yellow number.

The client quickly started to realize that the best way they could seek to lower their overall healthcare expenses was to lower their overall healthcare and pharmacy claims.

We spent the next hour reviewing their plan and claims information, in order to help them to understand the following:

  • Changing brokers does not lower their health insurance costs
  • Health insurance premiums follow health care claims
  • Health “insurance” is a misnomer, and they should look at it as a financing tool.

Our solution:

After reviewing the client’s plan, as well as their claims information, this client was ready to start to take action. Over the next several months, we helped them to implement the following changes:

  • Transition from a fully-insured health plan to a self-insured health plan.
    • Think of this as being a “pay-as-you-go” model, as opposed to a “pre-paid” model like fully-insured. In doing so, the client would only pay for the claims they incur, and the excess margin would be removed.
    • We set-up an additional session to review the mechanics, process, and risks involved with this change, in order to create buy-in.
  • Best-in-breed solutions.
    • We used an independent TPA, paired with a network that would allow us to influence costs, and steer members in the right direction to get the best care at a lower price.
    • A cornerstone to the plan was embedding a concierge style advocacy solution into their health plan. This became a solution to allow members to price-shop for services in advance, but also to find higher quality doctors.
    • Along with this service, we also mandated second opinions for surgeries that were pre-authorized by a doctor with a quality rating of less than 90%. This means that we were helping to introduce patients to an “A” rated doctor, anytime a “B,” “C,” “D,” or “F” rated doctor pre-authorized a surgery.  Members could still receive surgery with the lower quality doctor, however this way they would have a “pause point” to reflect on their options.
    • We also led with an independent Prescription Benefit Manager (PBM) paired with a PBM consultant. We also implemented a Variable Copay Program, which leverages manufacturer assistance in order to control prescription drug costs.  This easy change netted a savings of $100,000 in the first year alone.
    • We also embedded claims analytics – not so that clients could just see what they have spent, but also the conditions that would drive future costs, so that we could coordinate regarding plan design, cost-control solutions, and more.

Overall, this was a minimally disruptive change.  There was a new network, and new prescription program in place, but overall this was far less disruptive than higher deductibles, and higher premiums, making it a “no-brainer” to move forward.

The results:

At the end of the first year, the client had lowered their healthcare budget from a renewal cost of $2.3M to just $1.4M, for a near $900,000 savings over staying as-is.

Even better yet, the client made more positive changes in the following year:

  • No changes to benefits
  • Reduced health care premiums by as much as 40%.
  • Implemented a $250 incentive for anytime a member used the concierge solution to locate services.
Case Study Chart

With these changes, we project a further reduction in cost for the following year, and the client is looking for more ways to reinvest the savings into their program to improve benefits.

Overall, this was a win-win for both the Employer and Employees, with more dividends to come.

Other Resources:

The Health Plan Success Playbook

Seven Deadly Sins in Self-Funding

Six Signs You’re Not Ready for Self-Funding

Self-Insurance Evaluation Scorecard

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