How to Save 10-30% on Company Healthcare Costs Each Year
On this episode of Healthcare Simplified, John Glascott shares 8 steps you can take to lower your company’s healthcare costs by 10-30% each year. John is the Chief Commercial Officer at MedZoom, a company that powers modern healthcare marketplaces.
MedZoom is like a GPS for your health plan. They have a modular technology platform that helps self-funded employers reduce their healthcare spend by 10% annually with a white label mobile app than can be branded for each company. MedZoom’s goal is to deliver a one-stop, unified member benefit experience. The MedZoom platform provides the following services:
Pre-serviced comparative shopping based on a plan’s historical claims data.
A payment platform where members can pay medical bills electronically.
Deep customer relationship messaging for HR personnel.
A digital benefits wallet.
Integration with telemedicine, HSAs, call centers, etc.
8 Ways an Employer can Decrease Their Healthcare Spend
There are 8 main ways that an employer can save 10-30% on their current healthcare spending. However, enacting these will require doing things differently and extra work on the part of the broker, employer, and TPA. These 8 ways are split into two groups. The first three steps you should take now, in your current plan year, and then the five steps you should be thinking about and planning to implement the following year.
Number 1: Get full and unrestricted access from your plan administrator to your claims data.
This can be hard to accomplish because your plan administrator may not want you to know what you are actually paying. However, it is your legal right to know. It is important that you can get access to this data in real-time and have an ongoing analysis of the data so you can see cost outliers and what you can do to contain them. Once you have this data you will be able to make meaningful purchasing, supply chain optimization, and business management decisions.
John made the following example, “Imagine a shipping company not knowing what their costs were and being told that’s just proprietary. They wouldn’t put up with that. Yet in healthcare, that is the norm.” Data is critical to making decisions, so it is amazing that people don’t know what they are spending on these things. Ignorance is not bliss in the healthcare market.
Number 2: Consumers are comparison shopping for everything, except healthcare.
Consumers are not technically “consumers” of healthcare because they aren’t “shopping” for better prices, they are unaware of the prices getting higher. This problem can be easily fixed if employers offered their employees incentives and education on some easy healthcare shopping tips.
If employees have the education to shop around for their healthcare they could save themselves and their employers a lot of money. One example that most people talk about is that radiology, MRIs, or blood labs can be cheaper at an independent, free-standing unit at a mall than it would be at a hospital. However, a physician that is employed by a hospital is going to write a script for it to be done at that hospital and that will cost the patient $2500 to $4000. If you go to someplace else it would cost you $500 to $800. This small change in where you are getting your tests done can save you thousands of dollars.
Another thing that consumers should be aware of is the price differences between local hospitals for the exact same procedures. These price differences can be extremely large even between hospitals within close proximity to each other. John gave an example of two hospitals that are within 5 miles of each other and have a $12,000 difference between their pricing for a vaginal birth. Without the knowledge to know this is going on and the data to see the prices, consumers wouldn’t be able to see these variances.
However, even if consumers are educated and try to shop around, it will be hard to find the information because most healthcare workers won’t give up that information. With Obamacare, health insurance companies can only keep 15-20% of the expenses for administrative costs, so they will make more money when costs go up. This means they don’t want you to know what the costs are because it benefits them for the prices to go up.
Number 3: Try to secure direct or cash contracts with the plans most used high-volume providers. Or ask them about bundled pricing for common procedures.
These two changes can allow you to receive a lower price for common procedures that are the bulk of your health insurance claims. While this is something that employers should be doing, it can also be done by consumers.
John’s wife did this with her dermatologist. Instead of going through the insurance company and having to pay $250 (they have a high deductible plan so it would not be covered), she asked her dermatologist how much it would cost if she just paid them directly. The cost dropped from $250 to $100. That is a $150 savings just from getting rid of the middle man and working directly with the doctor.
Employers can do this at a larger scale. As long as you are paying them what the BUCAs are paying them, then they are happy to do it. Routine Healthcare is like getting your oil changed for your car. Going to the dealer, you will pay 50-100% more than if you just go to the quick change center and this is very similar in healthcare.
Number 4: Break up the trifecta of over paying with a BUCA PPO, BUCA ASO, & BUCA PBM that’s owned by the BUCA.
When these are unified, you are going to pay much more than you would if you shopped around and broke them up into three different corporate buying decisions. That is why it is very important to select an outside independent third party administrator (TPA) to administer your plan. The TPA can pick (with you) an independent, transparent pharmacy administrator. Also, if you need a PPO, regional PPOs are generally cheaper, on a PEPM basis, than a BUCA.
There are a lot of good TPAs out there, like Allegeant, and they will have the employer’s interest at heart, no their own or their shareholders. TPAs are out there to steer people in the right direction, to cut costs, and to provide very good service to the members, and adjudicate the claims correctly. BUCAs are not big on service and they are not going to fight for you.
Number 5: Eliminate any of the BUCA no audit clauses that are in your contract, so you can audit large hospital claims.
The main concern is to audit all claims over $15,000 in your itemized bills before they are paid because 90% of hospital bills have errors and you are most likely overpaying. Pulling these claims would give you a look at a large part of your plan’s annual spending because 50% of this spending is done on hospitals and facilities, and 60% of that are claims that are over $20,000. Being able to see these claims and make sure they are correct and see exactly what is being paid for can cut your spending costs down drastically.
Number 6: Know how your outside benefits broker/adviser is compensated.
The question you should ask yourself is this, is their income coming from consulting fees from you or from a BUCA or other vendor commissions? This is an important question because you need to make sure your financial interests are aligned with that of your broker. If your broker is making money off of commissions from a BUCA or other vendor, than they are going to be less concerned with your financial needs and more concerned with keeping those other vendors happy so they keep receiving their paycheck. This problem is the reason why John suggests to only work with independent consultants or advisers that make money from consulting fees only.
Number 7: Use direct primary care for routine daily physician needs and hospital catastrophic needs.
This change will make tour monthly costs way less expensive while still covering all of your routine needs.
Number 8: Switch to a Referenced-Based Pricing plan
This type of plan is the fastest growing alternative to PPO plans and can save you $2000 to $3000 per employee annually. The way that it works is that the plan pays the hospital a referenced price based on Medicare instead of paying a PPO discount (which is actually not even a discount). This cuts the inflated prices paid to the hospital by 40-50% and creates a large savings for the employer.
Using these 8 suggestions can save your company and your employees a lot of money and can help to change the way healthcare is priced for the better.
This post is based on a podcast interview with John Glascott from MedZoom. To hear this episode, and many more like it, you can subscribe to Healthcare Simplified.