Where it all begins….

The prospect of starting a family is both exciting and terrifying. Being a new parent means new worries, like lack of sleep … and new financial obligations. Specifically, concerns about paying for childcare, healthcare and diapers can be overwhelming. These new stresses not only take a toll on the family, but also on the employment relationship. Most employers feel that solely offering health benefits for pregnancy and family planning expenses is enough, but it is not. In fact, focusing on the health benefits alone can lead employees to focus on the wrong issues.

It is challenging to pinpoint "where to start" when it comes to putting the puzzle pieces together. Without guidance, employees generally will focus on their perception of getting the "best" care and what the "cost" to them would be to receive that care. If the "costs" to the employee are the same regardless of the facility they select, it would not be unreasonable for an employee to assume that the highest cost facility was the "best" one.

In my own experience…

I can personally relate to this dilemma. In my experience, key considerations for expanding a family were (1) how much will this cost ME and (2) where should I receive care during MY pregnancy and delivery.

Having a self-funded plan through my employer and working in the self-funded industry, I was very aware of the options and flexibility in benefit design. Being self-funded meant that the plan could dictate the specific out of pocket costs for particular benefits, like pregnancy expenses.

I already knew the monthly contribution costs for my health plan, but contributions would only be part of the financial obligation. Even before budgeting for childcare and daycare and bottles and baby gear, I needed to know how much it would cost to have the baby. I would need to visit my practitioner throughout the pregnancy, so I had to consider the cost of each visit. The plan provided 100% benefits coverage, without a deductible. I would need to deliver the baby, so I had to consider the cost of the maternity care. The plan provided 100% benefits coverage, without a deductible. Wow!

Reviewing my benefits and discussing the impending costs for this life event with others, along with my experience in reviewing hundreds of plan documents made me realize how very lucky I was to have these plan benefits. Most health benefit plans have hefty deductibles on maternity services, meaning it was typical for an individual to have to pay thousands of dollars just to have a baby.

Feeling very fortunate, I asked myself how my health plan could be so very different than most other health plans. I wondered if my coworkers understood the generosity of this benefit and used it to their advantage?

For example, with such lavish benefits, I knew I should not have a problem finding where to receive pregnancy related care. I would like to consider myself an educated consumer of healthcare and my primary motivation as soon as I realized I was expecting my first child was where can I get the "best" care.

I thought, living in a larger city would make this easy since there were so many great options for prenatal care. I just needed to pick the "best" one. I started by asking friends for their opinions about their birth experiences. After a couple of tours at local hospitals I decided on the "best" one for me. At the time, best meant a great facility, known for quality care, with a great reputation for delivering babies. The fancy lobby was icing on the cake.

Thankfully, the pregnancy was relatively easy, and I was blessed with a wonderful son and $0 health care bills.

Getting to Free…and creating incentives

My health plan, however, now would receive the claims for the maternity care. As it turns out, the year I delivered my first child was a very popular year for maternity care on our plan. Did the others undergo a similar analysis, or did they solely look for a facility they thought was the "best" because it had the highest price tag when evaluating choices for care? Cost and quality are not synonymous.

Being self-funded granted access to the claim details associated with the many pregnancies. Further, we were uniquely situated as a self-funded employer to review, analyze and adjust using this vast amount of data. It was this investigation that lead to the creation of significant and influential programs for our health plan that would forever change how our plan was able to offer benefits to employees.

The review of the data established that many hospitals in our area provide equally exceptional care, but not all exceptional care is equally priced. For example, the same 'normal' delivery could vary in price by upwards of $10,000 if provided at hospital A or hospital B, even though hospital A and hospital B are blocks apart. We knew this type of information needed to be shared and become an element of our future incentive programs. In reviewing the data, it was apparent that in some cases "best" was being associated with "highest cost." Data, however, established that the key indicators for "best" really should be objective measures such as infection rates and readmission rates, for example.

To encourage more focused discussions about pricing and quality of care we implemented a preemptive consultation incentive for employees. By voluntarily contacting Human Resources, individuals could have a rich conversation about their options for care. This incentive was available to anyone with an upcoming (non-emergency) procedure. For refreshing themselves about the plan benefits and options available for such services, employees would be financially rewarded. The reward was not conditioned upon utilization of the recommendations, but solely having a conversation.

Next the company needed a way to incentivize utilization of high quality, but cost-effective facilities. For example, it was important that the analysis for "best" included objective measures beyond pricing. In order to do so the company needed to offer a reward that new parents would find attractive. After having a baby I can attest to the seemingly endless need for diapers and wipes. Mindful of cost (and value) of diapers and wipes, the company initiated a program which would supply new parents with a year supply of diapers and wipes for voluntarily opting to seek care at a high quality, cost-effective provider.

In addition to the medical costs associated with delivery, a review of the data identified additional cost saving opportunities on the prescription claims. For example, if a prescription, as prescribed by their physician, may not be the least costly option for the individual (or the plan). Generally, individuals did not have a reason to question a prescription or ask whether a generic or other alternative would be available. This lack of knowledge was creating expensive consequences for individuals in some circumstances.

To address this a program was devised to encourage additional conversations about prescriptions. To incentivize the individual to ask the questions or further investigate, the program rewards the individual with a percentage of savings obtained by identifying (and switching to) an appropriate and cost-effective prescription.

For example, a physician has knowledge of the patient's medical history, but generally would not know that an individual's copay for drug A would be $500, but would be $50 for drug B. The only difference being that drug B was a generic. Knowledge could empower the individual to investigate whether drug B would be an appropriate option, saving the individual $450.

Implementation of the programs was the first step, but employees needed to be educated and encouraged to take advantage of them. This generally could be accomplished by staff meetings, but real-life case studies would be even more effective.

Subsequent to the initiation of these programs I learned that I was expecting my second child. Not only was I excited about my growing family, but also to take advantage of the new incentive programs.

I contacted Human Resources to learn about the options that would be available to me. Only upon having this conversation did I realize that the disparity in price between hospitals for maternity care. A review of hospitals near my home revealed that if I went to the same facility to deliver my second child it would be substantially more expensive (and the objective measures were actually less impressive) than delivering at a different facility. The savings to the plan would be significant (and better success metrics) if I switched to a high quality, cost-effective provider. For doing so I would be rewarded with a year's supply of diapers and wipes. The choice was easy.

In addition to identifying the proper facility, a discussion regarding the proper prescriptions was necessary. As a precautionary measure my physician prescribed a certain prescription. She did not have access to my health plan benefits, but knew this medication was necessary. I asked the questions – was this a specialty drug? Did an alternative exist? Was there a generic? It was important for me (and my health plan) to pay for the drug most appropriate for me, and it would not be reasonable for me to assume the physician had gone through the analysis specific to me and my health plan. As a result of this conversation, the "best" medication was identified that was of the highest quality, and at a cost-effective price.

Due to these necessary conversations for this one condition and scenario, I received cost-effective care and delivered a second child at the high quality, cost-effective provider. The care received was exceptional and undifferentiated in quality from the provider whose charges were nearly double.

While this was a personal example, it illustrated the success these programs can have not only for improving employee morale, but also for saving the plan substantial sums of money. Using this as a model other companies can implement programs based on the unique characteristics for their employee populations.

If a company has not yet considered the impact of these types of programs now is the time. The combination of these programs has changed the landscape of our benefit offerings. Our employees are engaged, our employees are cognizant, and our employees are consumers of healthcare.

Now imagine working for a company that not only understands these pressures but can alleviate them completely.

Jennifer M. McCormick joined The Phia Group, LLC as corporate counsel in 2008. As the senior vice president of Phia Group Consulting, Attorney McCormick concentrates on a variety of healthcare and regulatory issues facing employee benefit plans and their administrators.

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Changing perceptions of health benefits, one pregnancy at a time

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