Employers and plan sponsors are increasingly choosing to self-fund their employee health plans to achieve greater control over the value and volume of their healthcare spending. Since 1999, when self-funded health plans covered 44% of the nation’s employees, the percentage of employees covered by self-funded plans has grown to 65%.
Self-funding offers many benefits, but it also comes with risks for plan sponsors. Instead of paying premiums to an insurance carrier to cover the possibility of high-dollar claims, the health plan sponsor takes on that risk and funds all potential claims.
But how big is the risk? The number of million-dollar claims for covered employees rose 45% between 2019 and 2022, according to a recent report. A few high-dollar claims in short succession, or even a single catastrophic claim, could have a massive impact on self-funded plans. Most plan sponsors carry stop-loss insurance, which provides reimbursement for claims that exceed a certain amount, but managing claims at the billing level remains essential for keeping total costs contained.
Managing greater risk
Self-funding using a high-quality, multi-capability third-party administrator (TPA) provides advantages in flexibility, accountability and value. However, high-dollar claims threaten to counteract the many benefits of self-funding. A single claim could be catastrophic not only for the member but also for the plan sponsor and other employees who depend on healthcare coverage.
Two types of stop-loss coverage provide protection for plan sponsors against high-dollar claims: specific and aggregate. Specific stop-loss (or individual stop-loss) protects against a high-dollar claim for any one individual, rather than against an abnormal frequency of claims in general. Aggregate stop-loss, on the other hand, provides a ceiling on the total amount that a plan sponsor could pay for eligible claims during a contract period. The insurance carrier therefore reimburses the plan sponsor after the end of the contract period for aggregate claims above a certain amount.
Stop-loss insurance is an effective way to minimize financial risk without sacrificing employees’ healthcare quality. However, many stop-loss insurance policies have coverage limits, and the plan sponsor is responsible for each claim’s initial cost.
That’s why, along with stop-loss insurance, a methodical and deliberate high-dollar claims review process backed by a robust medical management program can make a significant difference.
Claims review is critical
Because high-dollar claims mean different amounts to different sponsors, what triggers a high-dollar review is highly customizable with the best TPAs and can be triggered for claims over certain thresholds established by the plan sponsor. Most high-quality TPAs have an expert high-dollar review team with years of experience ensuring claims are priced and billed correctly according to the contract, while also paying special attention to site of care and supply charges.
When claims are passed to a high-dollar review specialist, they comb through every aspect of the claim for accuracy in billing, pricing and adjudication. The best programs incorporate experts who can decipher and flag clinical, network and coding issues, determine the appropriateness of charges and even negotiate better payment terms. Then an internal expert team reviews the claim to make sure the documentation matches, the interventions were clinically appropriate and pricing reflects any relevant discounts. Finally, the best practice is to partner with an external vendor to provide a third-level review to ensure correct pricing and coding.
Medical management ensures high-value care
As medical prices vary widely depending on the site of service – with little discernable difference in quality of care – the best TPAs offer comprehensive medical management programs to mitigate wasteful spending. Often, hospital-based care comes with extra costs, such as hospital fees for providers, lab and imaging fees and outpatient costs for hospital-contracted providers. To contain these costs, care coordinators reach out to members to ensure they are receiving the best value care. This can mean redirecting members away from expensive hospitals and health systems and toward preferred providers who can deliver the same or higher quality care at a lower cost.
For self-funding to work at its best, plan sponsors need to be equipped with customizable tools and expert resources from their TPA to enhance the member experience, improve health outcomes and ultimately, achieve health care goals and objectives. High-dollar claims review is just one aspect of an effective medical management program that is geared toward health care enablement.
Coupled with other strategies such as accountable care, direct contracting and chronic disease management, just to name a few, high-dollar claims review can be another useful tool for benefits professionals seeking to deliver more value for their organizations’ expenditures on employee health benefits.
Nancy K. Klotz, is chief medical officer at Brighton Health Plan Solutions, where she is responsible for clinical strategy across the company’s various business segments.
Nancy K. Klotz , 2024-04-09 18:00:00
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