Imagine a situation like this:There are several people involved in making a decision about ahealth plan.  Each has a different perspective on how toevaluate the plan and as they focus on it, they realize they allhave different goals for what they want the plan to accomplish.

|

In this article, I present a simple four-question model foradvisors and clients evaluating a health plan so that the peoplewithin the organization use a common goal to guide decisions.Everyone on the team involved in making the decisions at the clientlevel should go through this model to avoid the tug of war thatoften occurs.

1. What is your current PEPY and what do you want it tobe?

The per employee per year (PEPY) is the claims cost, medical,and pharmacy claims combined. It is the allowed amount,not the paid amount. Suppose the organization is movingtoward a complete coverage health plan so  they can waivedeductibles and copays to make health care free for theiremployees. The reason to look at the allowed amount is that it willeventually become their entire responsibility. They will take onboth the plan and the patient responsibility when they move into at100 percent coverage model.

|

A second reason relates to Milliman Care Guidelines (MCG) as thebenchmark for measuring the plan's performance. This is a morereliable benchmark than a book-of-business comparison. Abook-of-business comparison is like going to a support groupmeeting and saying, “Yes, I'm broken, but I'm not as broken asthat guy.” Generally speaking, the health care system ishorribly broken across the board. The MCG data shows the goldstandard, best in class. Here is what we should be striving for. Weknow it's attainable, because they've gone through all of theanalysis and applied all the actuarial methods.

|

Always try to compare your group's performance to a goldstandard, evidence-based criteria or an MCG type of benchmark, notnecessarily to a book-of-business benchmark.

|

MCG defines PEPY as medical and pharmacy claims combined allowedamount. There are other definitions for PEPY. Avoid becomingconfused by other measuring methods, such as per member per month(PMPM), per member per year (PMPY) or per participant per year(PPPY). Make sure that you understand the units of measure.

|

In 2016, the MCG national average was $11,000; it was close to$12,000 in 2017 and in 2018 it was just short of $17,000. A companymanagement team who does not know their PEPY needs to determinethat number or hire a consultant to dig through the data todetermine it.

|

For example, the PEPY on our well-managed PPO book-of-businessis still running at about $6,500 PEPY and has been pretty stablefor a number of years now. Clients who make that transition oftengo from a very loosely managed or even an unmanaged environment toa well-managed environment.

|

There are different levels of aggressiveness applicable fordetermining medical necessity and appropriateness. In awell-managed environment, a male patient would need plain filmx-rays first before an MRI of the spine. He would have failed atleast six weeks of conservative treatment (physical therapy,medications, weight loss, if appropriate). The certification wouldbe denied if a health care provider ordered an MRI of the lumbarspine after the patient did just four weeks of conservativetreatment consisting only of medication.

|

In a moderately managed plan, the certification might be givenafter four weeks of medication. The patient will be close to sixweeks by the time he gets the imaging done anyway, so we'd let thatone slide through.

|

The administrator of a loosely managed plan would probablycertify the MRI and move on to the next case.

|

Guiding the location of testing is another aspect of how tightlya plan is managed. A well-managed plan's care manager directs thepatient to the least costly location of the MRI machine. In amoderately managed plan, the outpatient setting would be ideal, butthere could be some flexibility. A loosely managed plan caremanager would not aggressively push for the test to be done at afreestanding facility.

|

Although $6,500 is a benchmark, if your group is spending over$6,500 PEPY, they're probably overspending. It is possible toreduce this number by moving a plan in a PPO environment to atransparent TPA, carving out the medical management and utilizationof a comprehensive care management strategy.

|

Additional figures:

  • Our RBP book-of-business performs at about $4,500.
  • Among those who are doing direct contracting with bundledsurgical pricing, carve out imaging, EAPs, medical tourism and evencash pay pricing, the book-of-business performs between $2,500 and$3,200 PEPY.

Where does the group want their PEPY in the future?Understanding where a group is performing today on their PEPYclaims cost and what target number they want in the future isimportant.

2. What is the noise level that you're able to toleratein accomplishing that PEPY?

Any change is going to generate noise.  Heck, even nochange can generate noise! The more aggressive the new process, themore resistance employees show and the greater the potential ofissues with low morale and productivity. Executives ask:

  • “How are my employees going to react?”
  • “Is this going to be disruptive?”
  • “Are people going to be lined up out my door complaining aboutour new health insurance?”

Here's what people undertaking this endeavor need to understand:PEPY and noise are inversely proportional to each other. When yournoise is very low, it's generally because you're loosely managingthe process by paying for every procedure or service. Your PEPY ishigh. Noise increases when a company tightens management of theplan. The faster a company clamps down on health insurance plancosts, the more the noise goes up.

|

The laws of gravity dictate what goes up must come down. In mostinstances, there are quick responses in relevel settings. Even ifthe group decides it's going to cut its PEPY in half as ofyesterday, that noise will skyrocket. But pretty quickly, it willcome back down, usually within about 90 days. Most of the noise youare afraid you're going to experience will not materialize; that'swhat the data shows.

|

Companies can mitigate noise by managing a good open enrollmentand having a positive spin in helping people understand the goal isto get them the right care at the right time at the right place.The right price is generally the natural consequence. The noise ismuch lower in a one-on-one open enrollment. The engagement isdouble when you have done a one-on-one open enrollment, so considerthat as a noise mitigation strategy.

|

Some noise is necessary and a good thing. The insurance carrieris touching  1 percent of your population. A more well-managed model is to contact 20 percent ofthe population, because they're driving 80 percent of the claims.When all of a sudden 20 times the  number of people aregetting contacted compared to previously, there will be some noise.A well-managed model involves more reach out to people, connectingwith them, asking questions and probing and pushing them to think alittle bit differently about their health plan.

|

The question becomes, “How much noise are you willing to endureor tolerate? What is your noise threshold for achieving the desiredPEPY?” It is critical you understand this threshold. It is notpossible to cut the PEPY in half without generating reactions fromemployees. Be skeptical of a vendor who promises this.

|

Don't necessarily think of noise as a bad thing, but do makesure that you get an understanding of what noise level istolerable.

3. How quickly do you need to get to the targetPEPY?

Slowly reducing PEPY may result in minimal noise. But what ifthe company needs to quickly conserve dollars by rapidly reducingPEPY? That need requires a set of vendors who are skilled inachieving that solution.  Reference-based pricing willprobably be part of that process.

|

Understanding the timing of how quickly they need to get thereis really critical. It dictates which vendors/solutions need to beinvolved. The deadline also drives response time from vendors andconsultants. An urgent need affects the data collection andplanning process significantly.

4. Is this new approach going to be something that youwould benefit from, support and enjoy?

This question should be directed to the decision maker in the C-Suite. Suppose thehealth plan consultant puts together a strategy, pulls all thevendors together, presents the plan to the client, and getsapproval. Then the decision maker or her family who has a need forthe insurance benefits suddenly recognizes what they suddenlyperceive as its limitations. When that happens, the leader'sdissatisfaction contaminates the organization's culture.

|

Preempt the situation by asking the decision-maker, “OK, as Iunderstand it, we want a solution that delivers a PEPY of X withinthis amount of time with this level of noise tolerance. When Ibring you that solution, how is it going to impact you personallyand how are you personally going to respond when this applies toyou or to one of your family members?”

|

Practice that question, because when the decision-maker orsomeone in their family becomes sick, they may decide they want tobe able to choose what they perceive to be the best site for care,and it may not be covered in the plan, or may be covered at a lowerlevel. When they decide they're going to go to 'Facility X' becausein their mind that's the best place (often because it has a greatmarketing budget, not always because of objective quality and costdata says it's the best) and others in the company see thisbehavior, it will affect the culture of the entire organization,and the overall outcome of the program.

|

Imagine the conflict that arises when a care management nursetries to direct the patient to somewhere that has higher qualityand lower cost. The best success occurs when the decision makersunderstand the implications of the plan and can say, “I would usethis personally. I like this. This would be good for me and myfamily.”

|

To recap, the four questions are:

  • “What is the PEPY versus what do you want it to be?”
  • “What is the noise level that you're able to tolerate inaccomplishing that PEPY?”
  • “How quickly do we need to get to that target?”
  • “Is this going to be something that you personally wouldbenefit from, support and enjoy?”

Master the ability to ask these questions and you will masterthe process of helping a company decide on the best plan forthem.

|

Deborah Ault, RN, CCM, CCP, AATMC, BCPA, MBA – AKA Nurse Deb– is Founder and President of Ault International MedicalManagement, LLC (AIMM). Her company provides independentcomprehensive carve out concierge and patient advocacy-basedutilization management, care management, disease management, andpopulation health strategies to self-funded major medical healthplans or those seeking to become self-funded. Reach Deborah at[email protected] orwww.aim-m.com

Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.

  • Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
  • Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.