Most health benefit plans havehefty deductibles on maternity services, meaning it was typical foran individual to have to pay thousands of dollars just to have ababy.(Photo: Shutterstock)

Where it all begins….

The prospect of starting a family is both exciting andterrifying. Being a new parent means new worries, like lack ofsleep … and new financial obligations. Specifically, concernsabout paying for childcare, healthcare and diapers can beoverwhelming. These new stresses not only take a toll on thefamily, but also on the employment relationship. Most employersfeel that solely offering health benefits for pregnancy and familyplanning expenses is enough, but it is not. In fact, focusing onthe health benefits alone can lead employees to focus on the wrongissues.

Related: How family caregiving is having a big impact onrecruiting and retention

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

In my own experience…

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

Having a self-funded plan through my employer andworking in the self-funded industry, I was very aware of theoptions and flexibility in benefit design. Being self-funded meantthat the plan could dictate the specific out of pocket costs forparticular benefits, like pregnancy expenses.

I already knew the monthly contribution costs for my healthplan, but contributions would only be part of the financialobligation. Even before budgeting for childcare and daycare andbottles and baby gear, I needed to know how much it would cost tohave the baby. I would need to visit my practitioner throughout thepregnancy, so I had to consider the cost of each visit. The planprovided 100% benefits coverage, without a deductible. I would needto deliver the baby, so I had to consider the cost of the maternitycare. The plan provided 100% benefits coverage, without adeductible. Wow!

Reviewing my benefits and discussing the impending costs forthis life event with others, along with my experience in reviewinghundreds of plan documents made me realize how very lucky I was tohave these plan benefits. Most health benefit plans have heftydeductibles on maternity services, meaning it was typical for anindividual to have to pay thousands of dollars just to have ababy.

Feeling very fortunate, I asked myself how my health plan couldbe so very different than most other health plans. I wondered if mycoworkers understood the generosity of this benefit and used it totheir advantage?

For example, with such lavish benefits, I knew I should not havea problem finding where to receive pregnancy related care. I wouldlike to consider myself an educated consumer of healthcare and myprimary motivation as soon as I realized I was expecting my firstchild was where can I get the "best" care.

I thought, living in a larger city would make this easy sincethere were so many great options for prenatal care. I just neededto pick the "best" one. I started by asking friends for theiropinions about their birth experiences. After a couple of tours atlocal hospitals I decided on the "best" one for me. At the time,best meant a great facility, known for quality care, with a greatreputation for delivering babies. The fancy lobby was icing on thecake.

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

Getting to Free…and creating incentives

My health plan, however, now would receive the claims for thematernity care. As it turns out, the year I delivered my firstchild was a very popular year for maternity care on our plan. Didthe others undergo a similar analysis, or did they solely look fora facility they thought was the "best" because it had the highestprice tag when evaluating choices for care? Cost and quality arenot synonymous.

Being self-funded granted access to the claim details associatedwith the many pregnancies. Further, we were uniquely situated as aself-funded employer to review, analyze and adjust using this vastamount of data. It was this investigation that lead to the creationof significant and influential programs for our health plan thatwould forever change how our plan was able to offer benefits toemployees.

The review of the data established that many hospitals in ourarea provide equally exceptional care, but not all exceptional careis equally priced. For example, the same 'normal'delivery could vary in price by upwards of $10,000 if provided athospital A or hospital B, even though hospital A and hospital B areblocks apart. We knew this type of information needed to be sharedand become an element of our future incentive programs. Inreviewing the data, it was apparent that in some cases "best" wasbeing associated with "highest cost." Data, however, establishedthat the key indicators for "best" really should be objectivemeasures such as infection rates and readmission rates, forexample.

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

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

In addition to the medical costs associated with delivery, areview of the data identified additional cost saving opportunitieson the prescription claims. For example, if a prescription, asprescribed by their physician, may not be the least costly optionfor the individual (or the plan). Generally, individuals did nothave a reason to question a prescription or ask whether a genericor other alternative would be available. This lack of knowledge wascreating expensive consequences for individuals in somecircumstances.

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

For example, a physician has knowledge of the patient's medicalhistory, but generally would not know that an individual's copayfor drug A would be $500, but would be $50 for drug B. The onlydifference being that drug B was a generic. Knowledge could empowerthe individual to investigate whether drug B would be anappropriate option, saving the individual $450.

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

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

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

In addition to identifying the proper facility, a discussionregarding the proper prescriptions was necessary. As aprecautionary measure my physician prescribed a certainprescription. She did not have access to my health plan benefits,but knew this medication was necessary. I asked the questions – wasthis a specialty drug? Did an alternative exist? Was there ageneric? It was important for me (and my health plan) to pay forthe drug most appropriate for me, and it would not be reasonablefor me to assume the physician had gone through the analysisspecific to me and my health plan. As a result of thisconversation, the "best" medication was identified that was of thehighest quality, and at a cost-effective price.

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

While this was a personal example, it illustrated the successthese programs can have not only for improving employee morale, butalso for saving the plan substantial sums of money. Using this as amodel other companies can implement programs based on the uniquecharacteristics for their employee populations.

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

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

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

Read more: 

• How HSAs, millennials and consumerism are changinghealth care
• Unraveling the complexity of our health carebilling system
• 5 ways self-insured employers can find true centersof excellence