Pub. 16 2017-2018 Issue 4

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 19 new jersey auto retailer W W W . N J C A R . O R G Most often, a carrier’s traditional network is still available – but with more costs out-of-pocket. The key to the sustainability of these programs is the focus on quality rather than just cost, and carriers are embracing just that. Entrance to the typical narrow network is by invitation, based on a proven record of quality and positive outcomes, not simply a lower negotiated fee schedule. For example, the hospital with low re-admission rates due to in- fection is a better candidate for a narrow network because even with higher contracted rates, the quality factor of lower re-ad- missions will reduce costs. In fact, Horizon’s Omnia program requires formal risk sharing agreements – to ensure low-cost, high-quality outcomes. Level Funded ASO is a newer take on an old concept, self-in- surance. Traditional self-insurance has fixed administration and stop loss fees, but variable claims payments. It is that variability that makes it difficult to budget for expenses. Additionally, it can be difficult to leave a self-insured program because of terminal liabilities such as paying run-out claims (those claims not paid until after the plan ends). Level Funded ASO applies fixed costs to all three expense categories, and includes terminal liability. You can pay fixed expenses and walk away after twelve months, with no remaining liability. If the plan has lower than expected claims, a surplus may exist, resulting in a claims refund. Surplus refunds most often will equal 50 percent of the surplus, and may be ap- plied as an administrative offset in the renewal contract. Note that most contracts require that you renew to receive the refund. Most carriers, with the notable exception of Horizon, offer this funding model. Can an employer be 100 percent certain that all covered lives under one’s health insurance plan should in fact be covered? Is it possible a male employee is covering his girlfriend’s child as if he or she was his own? Eligibility Audits are a sound way to reduce your exposure to premiums and/or claims from non-eligible plan participants. An eligibility audit requires enrolled employees prove eligibility for all covered members. Generally, a third-party vendor is engaged to send communications and collect proof. Employees who do not prove dependent eligibility will have those dependents removed from the plan, reducing overall costs. A second Eligibility Audit strategy is to monitor spousal coverage when the spouse has availability of coverage through their own employer. If alternate coverage is available through the spouse’s employer, shouldn’t that employer bear the financial burden of coverage? By auditing which spouses have availability of coverage, an employer can save money by eliminating that spouse’s coverage, or implementing a spousal surcharge to defray costs. That’s a look at some of today’s strategies, but what does the future hold for controlling health insurance costs? Two emerging concepts may provide some answers; Vertical Network Integration and Reference Based Pricing (RBP). Vertical Network Integration has broad applicability to many health insurance concepts, while RBP is tied to self- insured programs. Vertical Network Integration is the idea that the various types of care are linked together, providing synergies, potential cost savings and ease of getting care. This can easily be seen with the current trend of hospitals buying physician offices. It is also the core concept of a Group HMO model, such as Kaiser, where all services are provided under one roof. While the connection of hospitals and doctors, and Group HMO’s is not new (does anyone remember HIP in NJ?), there are some emerg- ing concepts that could greatly impact the cost of care. We have all likely noticed the growth in Urgent Care Centers, often hospi- tal-owned. This vertical strategy increases the services available in a single setting, reduces costs compared to an emergency room visit, and increases traffic (and revenue) for hospitals. Perhaps more interesting is the announcement that CVS intends to buy Aetna, the third largest national health insurance carrier. Once vertically integrated, will we see more people getting routine care at the pharmacy due to increased services? Will CVS expand the availability of medical care at more of its locations? Will Aetna members see reduced out-of-pocket costs when accessing services at a CVS? The answer to all these questions is likely YES! Reference Based Pricing (RBP) has received significant attention recently and will likely be a hot topic in 2018 and beyond. Once again, it is a new take on an old concept – fee for service reimburse- ments. The adoption rate has been limited due to some inherent nuances, but that could change in the near future. RBP is a means of reimbursing medical providers and hospitals based on percentage of the Medicare fee schedule, often 120 percent to 150 percent of Medicare reimbursements. It is a strategy that is viable with both Level Funding and traditional self-insurance. Generally, an RBP-based program will utilize an in-network phy- sician network with strong discounts. Employees will often have a copay for using the designated network, but can use any provider at that same copay. Beyond in-network doctors, the out-of-network doctors and all facilities are paid at the pre-determined “percentage of Medicare” reimbursement. The benefit level is determined, and traditional employee cost sharing takes place, helping to offset the cost of the claim. A concierge is often engaged to negotiate non-participating fees, helping to minimize balance bills. The challenge created by an RBP program is that there is no guarantee the doctors, and particularly the hospitals, will accept the reimbursement as set by the plan – there is no contractual arrangement. This could lead to significant out-of-pocket bal- ance bills to members, and has the potential to harm employee relationships. It is clear that history, albeit with a new twist, is repeating itself in the health insurance world. Old strategies are getting a makeover, in hopes of reducing costs, increasing access, and improving out- comes. Will these “new” strategies be successful? The answer is a hopeful “yes”, but perhaps only until the next, great “old” idea is updated. Bruce Mazzarelli is a Vice President of Sales with HUB International. He can be reached at bruce.mazzarelli@hubinternational.com of at (732) 894-9849