Unbundled: [ənˈbəndl, adjective] A health benefits plan that’s built from a “stack” of independent, specialty vendors, rather than being run by a single carrier.
In this blog, we’ll explore strategies for bringing fully-insured clients over to self funding. Clients use self-funded plan designs to improve member’s access to quality care, and reduce unnecessary and wasteful spend.
Advisors should know how and when to position a good self-funded strategy. And when they do have a client on the line, the strategy should be multi-year, that methodically moves the group toward their desired state.
The unbundled plan designs most successful with groups of 100 to 2,000 lives are:
There are other plan arrangements (eg. CIGNA level funded, fully insured), but since we don’t consider them good for employee health or cost containment, we won’t cover them here.
With this plan design, a group separates themselves financially from large carriers while still “renting” one of their provider networks. This feels comfortable to members, who are used to networks and how they work. Since the group is now self-funded, the bills and the data come to them, giving them unprecedented insight into how their healthcare supply chain runs. In later years they can leverage this into better member outcomes and lower costs.
Renting a BUCAH network imposes some limitations. The BUCAHs insist on doing their own precertifications and utilization review, and on receiving claims directly. This means that the TPA doesn’t have an opportunity to provide steerage to members, or to audit claims for fraud, waste, and abuse pre-facto. Often, the claims costs aren’t necessarily lower with a PPO network. The value comes from lower pharmacy costs, potentially lower administrative costs, and more data and insight into plan utilization.
As mentioned, pharmacy is the lowest hanging fruit in this arrangement. You “carve out”, or use independent Pharmacy Benefit Managers to source, classify, and supply drugs to the group. When you do this, the formularies can be written with the group’s interests in mind, putting drugs common to the group in Tier 01 and less common drugs further down the list. The right independent vendors can also find drugs cheaper by leveraging Manufacturer’s Assistance Programs and international sourcing.
Ease of implementation: high
Impact to quality: minimal improvement
Impact to cost: improvement (mainly due to pharmacy costs)
With this plan design, the group uses a non-BUCAH national network such as First Health or PHCS for provider access. This still gives members the comfort of a network, and in many cases there is not a huge drop-off in access compared to the BUCAH networks. The difference here is that a flexible network allows for two key features that BUCAH networks don’t: Medical Management and Direct contracting.
Medical Management is a team of nurses and doctors who, among other things, handles all precertifications. They are trained to find opportunity to steer patients toward higher quality providers and/or less invasive pathways of care. The plan should be written in such a way that when members choose pathways that are better for them, their out-of-pocket obligations are lowered or even waived. Bundled surgical options also create an opportunity for improving outcomes and containing costs.
Direct contracting can be implemented with this plan design to open up pathways to locations that are going to be higher quality or more fairly/transparently priced than a hospital. Mainly this applies to local imaging centers, ambulatory surgical centers- somewhere that charges a deductible. To incentivize members, the plan should include language that waives patient deductibles if they choose these locations over a hospital.
This plan design also allows the auditing of claims before and after they are paid. This way the plan can catch errors and adjudicate incorrect or fraudulent charges on behalf of the plan sponsor and the member. This also allows member advocacy programs such as support for balance billing, which is a huge deal for members who are usually left to handle balance bills on their own.
Disruption: low to medium (steerage can feel awkward at first)
Ease of implementation: medium (employee engagement and education is important)
Impact to quality: big improvement
Impact to cost: improvement
All the steps from #1 plus:
Reference-based pricing (RBP) plans do away with any kind of network at all. This gives members no limitations as to where they can choose to seek care.
From the plan’s perspective, RBP is the best way of lowering the cost of claims. RBP plans pay claims and bills based on a percentage above Medicare rates (typically 140-180% of Medicare), as opposed to networks who negotiate discounts off a billed charge from the hospital, and can often pay 300-800% of Medicare. RBP plans see savings immediately and over the long term as they begin repricing claims at this lower rate of reimbursement.
This plan design includes the same cost containment tactics of the previous self-funded plan designs. The Medical Management team handles precertifications and watches for opportunities to steer patients toward higher quality, lower cost providers and/or less invasive pathways of care. Bundled surgical options are very commonly employed to improve outcomes and contain costs. PBMs proactively bring down the cost of drugs.
Direct contracting is very important for this plan design. This is mainly because RBP is still somewhat revolutionary, and many doctor’s offices and hospitals are not set up to immediately bill for RBP. Direct contracts make access seamless for both parties. Hospitals are harder to access on an RBP plan and not likely to quickly sign direct contracts. However, they will still see patients and bill as usual. The plan should include language that waives patient deductibles if they choose contracted providers over a hospital, as an incentive for members to choose providers that are better for them and the plan.
Ease of implementation: hard
Impact to quality: big improvement
Impact to cost: big improvement
All the steps from #2 plus:
The tech infrastructure needed to manage these unbundled plans doesn’t exist. This has created a fragmented consumer experience and delivers a fraction of potential value.