To answer this, you must understand that the current paradigm is built on networks, which are the profit center and only value proposition of any major insurance carrier. Pharmacy benefits management, stop-loss reinsurance, and precertification/utilization review sit on top of this to augment the patient’s healthcare journey. Theoretically, these act as checks along the way to make sure the patient has the best health outcome possible.
If the carrier owns the network and all the various checks, however, those checks now belong to the same business entity. Their job becomes maximizing profit for the carrier, not better outcomes for the patient.
For example, If United Health Care (a major insurance carrier) owns the PBM and the utilization review, why wouldn’t they use their utilization review to steer toward a more expensive drug? Independent operators are the only way to identify opportunities for savings and care improvement where your first priority is the patient.
The most relatable/visible is Pharmacy benefits. A group’s formulary prices drugs so people choose certain drugs first. Pricing is heavily affected by rebates & coupons available. But who is getting the rebates?
When the carrier sells you the drugs and designs the formulary, that formulary winds up meeting their needs more than the client’s. As an example, we had a 300-life automotive group who switched to RBP after the CEO realized they were being charged unseen fees, and rebates were being withheld by the PBM without his knowledge. Transparent, independent PBM partners demonstrate their value by keeping their clients’ costs down.
Another key area where incentives are often misaligned is in utilization review and case management. The purpose is to make sure patients get the best care possible- not simply the closest or the care their doctor/uncle/neighbor likes. But if the carrier handles the utilization review and owns the physician networks, the carrier puts themselves in an awkward position. In order to steer someone to better care, they might have to say “no” to a doctor they’ve already contracted to steer patients toward. And ultimately we have seen that network contracts win out over the patient’s best interests every time.
Robotic surgery is an example of this, where a robotic procedure that’s in-network is more invasive and less effective, and costs $120k, while a non-robotic surgery has better survival rates and costs only $15k. Hospitals negotiate very hard to get their robots “covered,” however, so patients get steered there regardless of whether it’s best for them.
The first way is to “unbundle” your plan into transparent & independent partners whose incentives are aligned with your own. There are four key areas where you can do this: (1) network, (2) PBM, (3) stop-loss, (4) medical management.
The second way is by making use of bundled surgical solutions. This is when a surgery center (in a hospital or independent facility) specializes so strongly in a particular procedure that they can economically bundle the procedure and all associated costs into a single price. The price will be transparent, predictable, and much much lower than a hospital. In this example below, you can see how bundled surgical centers provided better options than a major “name brand” hospital.
The third way - and the most extreme - is to eschew networks entirely. Currently hospital pricing is not based on predictable things like cost or quality- the numbers are made up. To truly buck the system, pay for services based on the cost of the goods and service rendered, not arbitrary network contract rates.
Choosing the right independent partners can help you bring down the “raw materials cost” all along the healthcare supply chain. That means the price of claims and the frequency of claims, the types of claims people go in for, and the pharmacy costs.
Precertification by the utilization review team is critical to identifying opportunities wherever the patient is getting care. Good medical management partners give patients access to clinical professionals who use quality databases to compare providers/sources based on quality and price. There you can identify bundled surgical solutions, avoid low quality providers who will ultimately cost more, or even divert to less invasive, more appropriate care.
On the pharmacy side, look for alternative sources for the drug as opposed to the carrier’s predetermined formulary. Buying drugs internationally and enrolling patients in assistance programs provided directly by the manufacturer are huge ways to reduce costs. Proper analysis of prior years’ claims can tell you which specific drugs to target with cost-containment tactics.
The first key to helping members navigate their healthcare journeys is to listen and be empathetic to what their circumstances are. Usually people are calling on the worst day of their life.
It’s also important to lay groundwork before going live about WHY we do what we do, and what tools are being given them to get the right care in a safe and cost-effective way. Flume and our partners are guides to give members the best chance of making the right choice the first time.
Flume takes a very proactive approach- 60% of our Concierge line call volume is outbound as our system sees members using their health plans and identifies ways the program is designed to reduce their costs or improve their outcomes.
For example, we had a patient getting a lung transplant. When we saw the precertification come into our system, we proactively contacted them to let them know they can list somewhere other than where their doctor sent them. Then we laid out the next steps so they understood the advantages of switching- quality, wait time, survival rates, readmissions.
At Flume we know that if you don’t engage with a patient as soon as possible after diagnosis- and educate them on their options- you’re not going to reach them. We watch claims, precerts, and eligibility requests to identify opportunities to educate our members on their various options and incentives, and use our Concierge team as the “tip of the spear” to make the connection.
Yes! We think there are many. Almost everyone wants help figuring out the system. A program offering friendly, knowledgeable and timely help is an incentive unto itself.
Beyond that, though, plans can be designed so that when members follow the advice of the clinical team, their costs are paid in full. Or they receive credits. Or diapers. Employers can get creative with rewards that align to their own group’s unique culture.
We have a group that saved so much their first year they paid for a premium holiday for all of their enrollees. It all contributes to convincing members to get involved in their healthcare.
This depends on plan design/type. When you unbundle but rent the CIGNA network, your options for cost containment and care coordination are limited. On the other hand, reference-based pricing is very flexible and highly economic, but noisy.
We mentioned that drugs and prescriptions are almost always the thing groups overpay for. Bundled surgery, likewise, can create major and immediate savings on claims costs, while improving outcome quality for patients.
To go to an unbundled, self-funded plan, groups should have no cash flow constraints. They need to keep a claims fund fully stocked and be able to pay up to their stop-loss deductible every month.
The leadership of that group needs to have a strong tolerance for risk- ready to take risk onto the company in order to reap the reward. The transition can be done in steps, of course. We don’t recommend anyone jump into the self-funded deep end their first year. The image below gives an idea of the year-over-year strategy a plan could employ to slowly move toward more transparency and more independence, while bringing your employees along with you.
Most importantly, the leadership needs to have a strong commitment to do things differently. Let your partners do their jobs of engaging members, finding solutions, and helping you stop overpaying. Any change comes with noise- a move from Anthem to Blue Cross will get people complaining. If there are things that won’t work the first year- that’s OK. This is a long-term strategy- it takes time to make something great.
Grant Parker (Flume Health) speaks with Bryan Bickely (Scott Insurance) about the amazing results of unbundled, independent plan design
In the final installment of our recurring series on healthcare arbitrage, we round up a few other tactics which don't require as much ongoing involvement, but which can still provide important savings opportunities.