Are your clients convinced fully-insured is the only way to go? Many small and mid-sized organizations are wary of pursuing other funding strategies, but as fully-insured rates continue to rise, this hesitation may be costly. In particular, reference-based pricing plans can result in significant savings. But there are a few common concerns employers have when they first hear about self-insuring and reference-based pricing.
In these circumstances, good communication and employee education are critical. Here are three common employer concerns, and how advisors can help overcome them.
“We can’t afford a high claim.”
Stop-loss and reinsurance carriers are increasingly working with groups as small as 25 lives, and offering lower stop-loss thresholds that make the transition more palatable for small employers.
Traditionally, these carriers would not cover individuals below $50,000 or even $100,000, which was sometimes prohibitively expensive for small groups. However, many of these groups now offer stop loss coverage as low as $25,000 per employee. At the same time, fully-insured rates have risen so quickly that self-funding rates are becoming more attractive to small groups.
“What if employees are balance billed?”
This is the big concern for most employers, and it is not unfounded. Reference-based pricing plans don’t have a traditional network contract, and some hospitals pursue patients for the rest of the billed charge. In some cases, hospitals have employed aggressive billing practices, including legal action, to obtain these payments from patients.
Reference-based pricing administrators typically take two approaches on this issue.
The first is to contract directly with the hospital or physician group. Some employers have found they can obtain better rates by negotiating with the hospital directly, as opposed to through a fully-insured carrier. These groups are typically negotiating based on Medicare’s reimbursement rate, rather than the chargemaster price, which is where insurer negotiations typically start. As a result, these employers benefit from having a reimbursement contract in place, but at lower cost than through a traditional plan.
In the other approach, where there is no contract at all, administrators typically provide legal advocacy services to employees. Many cases are easily resolved, though there are at least six, if not more, balance billing lawsuits pending now.
“Employees won’t understand how to use their benefits.”
Clients are correct that there will be a learning curve when they adopt this strategy. The details on how to use the plan will be different than what employees are used to.
But that shouldn’t deter groups from considering this strategy, which does not mean reduced access to care. With effective employee education, advisors can help employees learn how to use the new plan. Most plan administrators also understand this issue and have taken steps to ease the transition. Most provide insurance cards that explain the payment structure and how to find care.
Further, in many cases, operating outside of a traditional insurance network means employees actually have more options for receiving care. Advisors can explain “no more in-network versus out-of-network charges or provider searches.” They’ll also then need to explain the risk of balance billing and provide tools for finding cost-effective places to obtain care.
While the self-insured, reference-based pricing model may not be right for every employer group, every employer can benefit from learning that these approaches exist. Brokers will be instrumental in helping employers find the funding strategy that is best for them.