Cost containment is the practice of using specialized tools, workflows, and resources built within the health plan to prevent the unnecessary spending of (in this case) healthcare dollars. Examples of cost containment include: member-facing incentivized benefits (as well as ongoing education), claims review processes, and plan legal services.
Cost Containment Roadblocks
Depending on your claims administration partner, cost containment can be limited to a single strategy and/or process, or even be non-existent in a plan. Partnering with an experienced, technology-driven third-party administrator (TPA) can provide your plan with an efficient, multifaceted cost containment program that yields results.
A TPA is an organization that provides administrative services such as claims processing, eligibility, billing, and other benefit management services. Insurance companies and self-insured Plan Sponsors often outsource their claims processing to TPAs.
What’s an ASO Model?
An Administration Services Only (ASO) model is when an insurance carrier, such as Blue Cross Blue Shield, United Healthcare, Cigna, and Aetna (BUCA), is engaged by the Plan Sponsor to provide administration services only for the Plan Sponsor’s self-funded health plan. Plan Sponsors consider this model because of the discounts of the provider contracts and the breadth of the PPO network.
Carriers who operate on an ASO basis provide plans with access to their network and associated discounts but restrict what coverage levels are available and what cost containment strategies Plan Sponsors can use. On an ASO model you get the discounts of the BUCA network but do not have the flexibility to create additional cost containment measures within the Plan or even within the Plan Design itself—you use what’s provided by the carrier, nothing more.
ASO models might seem more cost effective on the surface than other administration services options since carriers often lower their administration fees and stop-loss premiums. Many times, using an ASO results in higher Plan spend (not less) due to pharmacy pricing, claim review limitations, and lack of additional cost containment strategies.
Example: We acquired a 200-location bank as a client who was previously using an insurance carrier ASO model. Our analysis of their pharmacy claims alone revealed they were substantially overpaying. After one (1) year with GBS, their base pharmacy program yielded a savings of 34.7%, plus an additional 66% savings on specialty pharmacy program spend. These cost savings were not a result of fewer pharmacy claims―in fact, they had more claims than the year prior. With the client’s prior ASO, the carrier controlled the pharmacy benefit management (PBM) contract and the medication pricing which cost the client an additional $2,000,000.
In the above example, the ASO carrier profited from the spread in the pharmacy contract. The client received an artificially low Rx rebate upfront that was depicted as a per employee per month discount against administration fees. This resulted in slightly discounted administration fees and no pharmacy rebates for the client. In sum, incentivized administration fees and lower stop-loss premiums don’t always result in Plan savings. In the real-world example above, the Plan Sponsor was enticed by lower administration fees and stop-loss premiums which actually resulted in millions of dollars in added medical and Rx claims expense.
Embedded and Comprehensive
Having a cost containment program (such as access to care at lower prices) is beneficial, but unless the program can be accessed 90%+ of the time, it’s a program that doesn’t achieve any real savings. So, how does the plan use these programs to convert these potential savings into actual savings?
Cost containment programs must be comprehensive, effective, and embedded within the claims administration and benefit access workflow.
Example: Let’s say your plan can obtain CPAPs prescribed to members at a discounted cost (a member-facing and incentivizing benefit). How do you ensure members utilize this benefit if/when the need arises? The answer: by informing them of the benefit before they need it, but only when there’s an indication that the member might be prescribed one (i.e. when they have a sleep study ordered by their physician).
During precertification of the sleep study is an excellent time to engage and inform the member. This way if the member’s sleep study results lead the physician to prescribe a CPAP, the member will already know where they can get that CPAP at a lower cost.
The Plan could offer increased motivation to use the benefit by offering the CPAP at no cost to the member and/or mandate that members acquire the CPAP from a specified source. What strategies are used depends on the decisions a Plan Sponsor makes to manage their plan.
In addition, the way cost containment opportunities are identified (i.e. triggered) can determine how successful that strategy is. In the CPAP example above, the trigger is set for the precertification of the sleep study, not just the CPAP. Once the precertification for the sleep study is completed, a nurse can reach out to the member and ensure they are aware of applicable money saving options. If the Plan’s workflow waits until the CPAP itself is being precertified, there is a chance the member won’t use the preferred source unless the plan takes a stronger stance on where they buy this equipment.
This is just one (1) example of how cost containment opportunity triggers can work. These triggers can be applied in a variety of areas, including precertification, claims review, high-dollar prescriptions, and other events where the Plan can make a big difference in the cost.
At GBS, our cost containment programs succeed because we don’t rely solely on access to care at lower costs or on money-saving programs―we build the program and its triggers directly within the workflow. Our goal is to implement and administer effective cost containment programs that not only benefit the Plan, but its Members as well. Maintaining a sustainable health plan is a collaborative effort between the Plan, its Members, and your third-party administrator.
Summary
PPO network savings are important, but these discounts alone don’t provide a comprehensive cost containment program or strategy. Establishing a collaborative relationship with an independent, technology-driven TPA gives your organization the ability to tailor your cost containment strategies to meet your plan goals.
Over the next several months, we’ll provide insight on a variety of cost containment strategies that can be effective in saving your plan money.