by Michael Rodgers

Did your company’s healthcare expenses rise last year?  If the answer is YES, there may be some good news on the horizon.

Really?  What is it?

Today, there is new technology available to you and your benefits professionals that is rapidly changing the way companies manage their healthcare program costs. These changes, if implemented correctly, can have a material impact on your company’s bottom line. Predominantly available in the Midwest and West coast markets for over 10 years, this technology is now available in the Northeast and its use is earning vast praise by financial and HR executives who identify its value.

The technology is based on the concept of data-mining a company’s claims utilization information. The executive consults a professional to decipher the data and assist him/her with the successful negotiation of lower renewal premiums.  This method is vastly different from the conventional, i.e. less transparent, approach used by most carriers when developing renewals for their customers because it offers your own independent evaluation and record of the claims utilization which, for groups over 100 employees, is what directly drives the increased cost of the medical program renewals, regardless of whether the plan is fully insured or partially self-funded. 

There are 10 key areas of a medical program into which these tools are able to mine in order to help facilitate a deep analysis of a company’s overall claims utilization data. You can now analyze each individual area for network and plan design inefficiencies, model potential change, and track year-over-year performance of the concern areas.  This enables you to easily measure trends of problematic issues, address them, and create solutions quickly, without the calorie burn of yesterday. 

Just So You Know…

The key to the success of the data-mining process lies in the readability of the specific coding of claim reimbursements from physicians.  This coding (commonly known as CPT - Current Procedural Terminology) is the basis of reimbursement for all physicians’ providers from the insurance companies.  Every time a patient of any health insurance program receives a service, the physician provider must include these codes to submit the claim to the insurance company for payment.  The CPT codes capture all of the information in one line item such as: the type of service, the setting in which it was received, the length of visit, the charge, a rough diagnosis (ICD-9 code), and many more pieces of critical information.  So, who can read these codes anyway? The answer is, basically, hardly anybody.

The Solution

This process of analysis is rapidly changing the way benefits professionals work, plan, and recommend alternatives.  Armed with this data, benefits professionals can track material changes and work together with insurance carriers on an entirely different level.  The power shifts to you, the premium payer, and away from the premium collector! You come armed; the benefits professionals can disarm the insurer.  Actually, you no longer need to rely on the insurance carrier’s underwriter for estimates of trends, plan alternatives or hard copy reports (have you ever really tried to read those?).  With our help, as you analyze your specific data, you can observe both areas of weakness and strength. It becomes a much more dynamic, collaborative process of program management.  Plan design and network design can be specifically tailored for each group. 

Make no more mistakes.  You no longer need to rely upon marketing a census to carriers to receive their lowest cost bids.  That process, although still commonly used, is the old and inefficient brokerage technique of yesterday.  Instead, you are able to choose a plan design, a network and an administrator (carrier) before going to the market.  The benefits professionals know at that stage that they are only contacting the markets which they already know are solutions for our clients!

What’s in it for me?

Picking targeted plan design modification, or overlaying stronger network managers, to maximize the claims’ discount are just two examples of how benefits professionals help lower the paid amount of claims (utilization).  Of course, these may result in:

• lower costs and lower renewals
• enhancement of employee satisfaction
• changing carriers less frequently
• identifying longer-term strategies
• creating longer-term partnerships
• inflating your bottom line
• putting forth less effort

“I’m concerned.  Don’t reduce our benefits”. 

We’ve heard that too.  In fact, it doesn’t mean that benefits are reduced.  Since the data gathered from the carrier includes specifics with regard to the census data, utilization data, as well as plan design information, the modeling tools highlight changes that may not have normally been suggested.  There are many instances where increases of benefits in particular areas of the plan can lower utilization in others.  For example, emergency room visits, wellness benefits, co-payments, or even some outpatient services are smaller areas that can affect other larger parts of a program’s utilization.  This methodology will help you fine-tune each area and help you determine the right plan – for you.  If your data shows that that ER usage is extremely rare for your group, why would you choose a plan that has a high amount of coverage in that area?  You wouldn’t.  And you don’t have to.

While these new tools and processes are helpful during the renewal and plan year, it is important to realize that it is only one tool and no two analyses are alike. Without a doubt, these tools create a consistent, measurable process that can be repeated year after year. But it is still the benefits professional, your advocate, who reads and interprets this information on your behalf.  In many cases this new information will represent more information than is possessed by the actual underwriters or carrier representatives. Your benefits professional is the one that can articulate this information in a usable format to structure renewals, negotiate pricing and build programs with lower costs.

About the Author:

Michael Rodgers is a benefit professional with over 17 years of experience in the New England marketplace.  His firm, Axial Benefits Group (ABG), specializes in corporate employee benefits consulting and brokering for all size companies. ABS is located in Burlington, Massachusetts.

To survive and thrive in this economic environment, companies more often are seeking to control expenses by focusing on efficiency.  One way this is happening with larger organizations is by turning to strategic outsourcing arrangements to maximize cost-saving opportunities and reduce the burden of noncritical activities. According to the latest study by Towers Perrin on HR outsourcing (HRO), cost reduction was the top goal driving HRO for 73% of the companies polled in 2009.  While this poll was primarily of companies large enough to have HR departments in the first place, it is a lesson not only applicable to the small and medium marketplace but even more vital to their survival or success. 

Many clients in the SMB marketplace are of 20-100 employees and often do not have a resident HR team.  More likely, the “HR” responsibilities are being handled by an administrator, finance professional or often by the business owner themselves.  This means that not only are HR activities being handled by someone who may not be fully fluent with State and Federal regulation surrounding employment, but who may not be focused enough on it (due to their other job duties or “hats” that they may wear) to stay current, who may, as a result, often make decisions based on hearsay, and draw incorrect conclusions drawn from experience and not necessarily what is legal or right.

While the easiest decision for most companies in this position is to address HR requirements and issues at the point of pain, this can be devastating to a company who allows HR process and strategy to take a back seat in what may be a critical juncture in their growth and maturation, or what many in the consulting world refer to as the “professionalization” of the management of a company.So business owners need to make a decision at their point of significant headcount growth. 

One choice is to take the path of immediate least resistance (the “Point of Pain” approach) which is certainly can be the least expensive, require the least mental and organizational effort, but which may carry a large amount of risk in the form of employment-related claims, litigation and cost the company from a culture and ultimately, competitive perspective.  Another is to recognize their shortfalls, and address transactional HR and its required expertise in some more direct way.  This, in the eyes of many business owners and management teams means the hiring of an “HR Professional” and may not be congruent with their goals for the company P&L. 

But there is another option. HRO, or fractional HR. 

According to the Towers Perrin survey, the emergence of improving service quality (in the form of employees' experience interacting with HR) has become a very strong driver of companies' decisions to outsource. In 2009, 50 percent of those polled said improving HR service quality was a top goal of their HRO efforts--a jump from 33 percent in the 2008 study. Curtailing time-intensive administrative tasks that added minimal value also remained a top reason for outsourcing, with 73 percent of respondents listing "eliminating the distraction of administrative and transactional work" as a top priority for their HRO strategy. 

For the SMB marketplace, adopting fractional HR still often represents adding additional cost where there was none before and this fact makes it a more difficult decision for the management team.  But with some companies (and I know one in particular) this decision does not need to be so binary.  In other words, fractional HR can be more efficiently combined with the execution of the payroll process and as a result, replace a cost already incurred by the SMB. 

And with justification, HRO is simply added value.  A tremendous value at that.

• We must RECOGNIZE the need to change.
• We must DEVELOP the plan to change
• We must EXECUTE the plan

In a recent statement while standing amongst business leaders and small business owners, Governor Deval Patrick recently outlined several vital recommendations to be undertaken by the Commonwealth aimed to reduce the cost of healthcare on businesses and maintain the quality of care in Massachusetts.   

What gives? Is it not clear here that universal healthcare is being achieved in Massachusetts on the backs of small businesses, and that the insurers have systematically passed their increases in the cost of doing business in the Commonwealth onto their customers?  Our own increase at CPHR this year for the same coverage was 29%!  So in response to the further disincentive for companies to do business in Massachusetts, we are now pointing the finger at the insurance companies.  What happens when these "recommendations" are implemented and no insurers will write policies in our state because it’s not profitable?  Will the state further expand MA Healthcare so that it becomes more imposing of a tax to the employer and furthers to dissuade businesses from having employees here? 

For that matter, where in the social contract is it our responsibility as employers to share the burden of cost of our employee’s healthcare?  For most of my clients, whom happen to be in the service business where the employees are the product, it becomes our second highest expense item after payroll itself.  Couldn’t these monies be better deployed in the form of expansion of marketing and sales activity, or new product development?   In other words, spend money that will create jobs and stimulate the economy. 

So shouldn’t healthcare become the responsibility of the employee, and a choice they make alongside of other lifestyle choices such as where they live, what schools they attend and what cars they drive?  And if they make the wrong choices, should not the Governor be pointing the finger at the Commonwealth’s citizens itself. 

Oh wait, that’s how you lose an election!

As I was reading the Boston Sunday Globe, I happened to glance through the “Help Wanted” section with one thought running through my mind…”Who still advertises open positions in the newspaper?”  Well, along with the players that I suspected…The MBTA, the area hospitals, and a few non-profits, I saw an old school display ad for Technical Positions at Yahoo!  The Internet portal.  The ad goes into detail about the amazing technology, the impact that the Internet has on society, and that you will “create the next generation of Internet experiences for consumers and advertisers across the globe”. 

At the end of the ad, they send you to their private career site—not Yahoo Jobs—to apply. 

I’ve done my share of recruiting and some of it in high technology organizations.  Why would I want to hire a Technical Yahoo! Person who was looking for a job in the newspaper Help Wanted section unless I was looking for an old school COBOL programmer? 

The display ad just doesn’t make sense, in my opinion.  If you want Technical people, you’ve got to go shopping where technical people hang out.  At a minimum, you should be on a specialty job board or send your recruiter to a technical conference.  The Globe?  Really? 

Disagree?  We’d love to hear from you.