For many business-owners self funding can be difficult to understand. It can feel intimidating and even risky. But here’s the reality: unless your deductible is 0, you are technically self-funding. The difference is you can pay more for the “ease” that comes with a fully insured plan.

Keep it simple.

Not ready for self-funded programs right away? Start small. Transitioning from a fully insured plan to a self-funded one will take time and commitment, but when you make minor changes to start, you can begin to gain control and utilize the flexibility a self-funded plan offers in a more confident way.

When you approach self-funding this way, you can begin to lower your costs. At the same time you can provide better service with the same, or better, care for your employees. And by giving your people an improved experience that also meets their unique needs, you can produce a healthier, happier workforce.

Where to make changes.

Using a transparent Pharmacy Benefits Manager, which is a small and manageable change, could be the best place for you to start. Capturing the overspend created in pharmacy is an easy, relatively painless first step to move into self-funding. A PBM is not disruptive and won’t create conflicts, it can even lower costs for everyone across the board.

As an advocate in the health care system, a PBM works to lower your prescription drug costs by negotiating with drug companies and securing discounts that can save you money and reduce your cost. Read more about how a pharmacy benefits manager can be a great addition to your health insurance plan here.

You can do something similar with diagnosis tests such as MRI’s, X-rays, bloodwork, and in some cases — surgery bundles, by working with Preferred Provider Organizations. This can allow you to negotiate direct agreements that ultimately cost you less. Essentially, you get better rates for these services.

This change can give your employees more flexibility and options, allowing them to see any doctor, even some specialists, without going through the primary care doctor. This flexibility is often seen as a significant perk for many employees because they are not limited to just one doctor or hospital, allowing more freedom to control their healthcare decisions.

These are all options you can implement without abandoning your traditional plan. 

Yet education and awareness for these options is intentionally limited by carriers for several reasons. One of which is hidden incentives for brokers to recommend traditional options. These incentives can make the cost saving options seem more complicated when they don’t have to be, creating muddy waters.

Clear the water.

If you work with the right broker and advisor, these solutions can be implemented in a successful way, one that allows you to control costs without disrupting the current plan or sacrificing employee’s health coverage.

Making adjustments to your insurance plan can be intimidating, however with the right advisors and the right options, you can be on your way to a cost saving self-funded plan, one that your employees can use with confidence and ease.

Cost saving and employee satisfaction. Connect those two and make the magic happen!

Pharmacy claims can be a big part of your spend, perhaps even more so than medical and with over sixty-six percent of adults in America using prescription medication, you need to be sure you’re delivering the most economical pharmacy plan you can.

This means diving into your pharmacy benefits and gathering necessary data such as information about deductibles, premiums, formulary, as well as details about your pharmacy benefit manager. 

A pharmacy benefit manager (PBM) manages prescription drug benefits on behalf of health insurers. They negotiate drug costs and can generate profit for themselves or the insurer they work with. They are meant to use the rebates and discounts they negotiate to create better pricing for employees and employers, but sometimes those reductions are absorbed at the source.

For example, a pharmacy benefits manager could pay $20 to fill a prescription then charge the health plan $60, and the insurance company pockets the difference. Because the numbers are not transparent and there are no regulations in place, every large carrier is likely benefiting from these earnings.

Hidden fees can add up.

This is another way insurers can make money through their partnerships, and the actual numbers aren’t always disclosed. On paper, you — the employer, appear to receive a discount on your prescription spend when in fact, no one really knows how much profit is being made. 

To see the numbers more clearly, you may need to carve out pharmacy from your current policy.

If your company is large enough, some insurance carriers will allow a self-funded plan to break their bundled package to get a pharmacy carve out. When this is achieved, you access their discounted prescription drug plan and they charge you a network access fee — something like $25.00 per employee.

If you want to continue with this carrier but want to manage the pharmacy through a third party spend they may charge you $45 per employee. Your carrier can charge you more for doing less because you won’t be using their service and therefore they won’t be making the profit they would have if you did.

Basically, your insurer wants you to use their own pharmacy benefit manager, because when you do, they profit. 

There is a solution.

By dealing directly with a pharmacy benefits manager you can gain the transparency and control you need to help you and manage prescription drug costs. In one case, we brought in a pharmacy benefits manager that dramatically lowered the costs per medication for the company. 

When all of the loopholes for making more profit behind the curtain are taken away, you can get the medicine closer to the actual cost and have access to the right rebates. You are essentially removing the middleman.

You spend less. Your employees spend less.

Large and small groups can benefit from this adjustment. Some employers opt to pass the rebates directly to their employees, reducing the out-of-pocket costs at the point of sale. Some use the rebates to lower overall premiums.

As trusted advisors we can assess your current pharmacy benefits program and help pass those savings to you and your people. If pharmacy is a big part of your spend, and it likely is, you need to know what is going on behind the scenes. 

Removing the middleman from the process is a small change that can make a big difference.

“Liars figure, and figures lie”. When I was a kid, I remember seeing this on a plaque in the clubhouse of a golf course I worked at. Now, as an adult in the healthcare industry, these words really ring true.

Medical loss ratio, a part of the healthcare reform, requires insurers to spend a specified percentage (80 percent for small-groups and 85 percent for large-groups) of total premiums on medical costs and expenses that improve healthcare quality. If these requirements aren’t reached, the insurers must issue rebates to their customers.

On the surface this sounds good, and that was the intent. What it might have done though, is accelerate rate increases significantly, causing a runaway increase in premiums for a couple of reasons.

The figures lie

Some insurers may have difficulty meeting solvency requirements. For example an insurance company could have been making a 25 cent margin on each dollar, but to make that 25 cents again, they then have to make that dollar 1.50. 

Profits still need to be made for the insurers bills to be paid. And since healthcare utilization has decreased during the pandemic, some large healthcare companies may not spend the required 85 percent on claims or claim-related expenses. 

In 2020, a Pennsylvania insurer didn’t spend what they expected on claims in one of their smaller business blocks during COVID because people reduced their use of services. Recently  employers  have been receiving large MLR (Medical Loss Ratio) refunds which on the face of things seems good. 

Before medical loss ratio rule came into effect, insurers could accumulate a reserve from these low-claim years to pay for the claims in high-claim years. Now, to overcome paying rebates and build up these needed reserves, this company, and many more, may need to increase premiums.

At first glance, rebates look beneficial for employers — but long term, the numbers don’t add up. 

And liars figure

Other insurers see an incentive to inflate the expense of premiums, because when they keep your costs up, they make more money. Premiums are calculated based on the average amount of medical claims made over several years. When this number is estimated a large profit can be established, even if there are rebates to be issued. 

On top of increasing premiums, big healthcare companies have found a way to bury expenses by using the pharmacy manager they control. Pharmacy can increase prices and charge the insurer, and because pharmacy is an expense, it isn’t reportable and the insurer can keep their margins.

This is legal, but devious and works against employers and their people. And although these large companies are legally required to look out for your best interest, profit is still their focus, not giving your people the best care at the best price possible. 

Where does that leave employers?

Understanding that even well-intentioned policies like medical loss ratio don’t actually protect you is just the beginning. You want to know that your benefits plan is providing maximum value for your employees based on the plan you have budgeted. 

To do this you need to review your plan continuously and with the help of someone that knows the ins and outs of the healthcare industry. Even if you are happy with the insurer you have, a review of your plan is still warranted.

An advisor can help pull back the curtain to show you how these policies really work and what is actually happening behind the scenes. 

Healthcare is very opaque. Realistically the medical loss ratio created the ability to make it look like the numbers are in your favor, but they aren’t. If insurers tweak the figures enough, they can still win. 

“Liars figure, and figures lie”, this is a numbers game and the house will always win until you take the game off their turf.

The greatest CEO’s talk less and listen more. This is because they know listening gives them the knowledge they need to make the best decisions for their people and their business. And because a CEO’s job is equally as important as it is difficult, active listening can be the key to their success.

In the healthcare industry, employee benefits can share the same tool for success. 

Your consultant’s job is to get the right care for your people, quality care that makes everyone’s investment (employee and employer) more effective. To be successful in this endeavor, your consultant needs to be genuinely interested in the needs of the business and people, they need to listen carefully and design a benefits program around those unique needs.  

A broker sells a product. A consultant designs a solution.

We have seen businesses who have one or two employees making up more than half of the healthcare spend. In one case study, we were able to gather enough data to take that burden off of the business. 

With the right partner, we were able to solve this issue and create an immediate gain for the business, and more importantly didn’t compromise the quality of care.

This is what separates a broker from a consultant. A consultant builds the solution your business needs, and utilizes several partners and options to get you there. 

Looking to the experts, sometimes we can save you a lot of money.

The reality is, when we’re offered a benefits product, packaged nicely, we’re drawn to buy it. But you need to do your due diligence for your people, and really find out why these benefits are being offered and if they truly represent your business.

New Transparency rules, that makes broker compensation more obvious, are on their way and because you can see what compensation a broker receives, you may find that seeking expert advice and building your benefits program with a consultant makes more sense for your people. 

When you choose to work with a consultant, you are gaining the knowledge their team brings to the table. You gain a partner that can look at the landscape of what might be available to you, someone who can help pick the best direction for your business, not just hand over a predetermined package.

A little effort can really go a long way. 

The trade off is that there is a bit more work involved. But, we are dealing with the second largest expense on your Profit & Loss statement, so it warrants the work, especially as rates rise year over year. 

You want to keep in mind your staff capacity and what change means for the quality of care for your people as well. Your staff bandwidth is solvable, and we never propose plans that lower the quality of care. In general, the quality of care actually improves.

Changing your benefits can be intimidating, we’ve all had bad experiences that can make us resistant to change. But change doesn’t have to be big or scary. For example, your people can still go to the same doctor they always have, but you could also introduce the option of higher rated doctors for less.

Big, small, not at all. 

Sometimes the business needs big changes, sometimes it needs small adjustments and sometimes, we dig through the data and we find that the plan is already working to its best potential. In any case, a thorough examination of the benefits program is needed, otherwise, how will you know if your benefits program is effective and efficient?

As an employer, you want your employees to make smart decisions with their healthcare because you care about their wellbeing and their health impacts the rest of the team. 

Just as you would prefer your employees to think carefully about their health, you should think carefully about how you support them in that effort. 

And by creating a unique plan with help, you can provide your people with the best possible care, while doing what’s best for your business at the same time.

Challenge yourself, now is the time for change. A motivational statement for personal gain, an intimidating one for business. But what if you reframe the way you think about change and make an incremental adjustment instead of a giant pivot?

75% of employers, by our estimation, should probably take this approach because change can be less intimidating when done in small ways. We understand this to be true in all other areas of life and business. If you want to lose weight, you might join the gym or begin a diet. In either case, you don’t expect to reach your goal weight by the second day. You start slow and lose a few pounds a week. 

Benefits can be the same way.

For example, your prescription spend is usually a major driver of healthcare costs and almost always an immediate opportunity for lowering your spend. The quality of care doesn’t need to change, and if it does, the reason is because the care becomes better. Your employees can get the same prescriptions they have always needed but for lower rates or potentially easier access with deliveries by mail instead of pickup at a pharmacy.

Small changes equal big returns.

Incremental changes like this are less daunting and easier to manage, allowing you to move forward confidently, with less disruption in your daily work routine. The tradeoff is that the savings are not as large and may not come as quickly, but instead, gain traction over time.

Here are some areas to consider when examining your employee benefits costs:

• Pharmacy spend. Depending on the size of your group, a change in pharmacy can mean savings in hundreds of thousands of dollars.
• Employee education. Implementing changes in the way your benefits are rolled out. Holding seminars and educating your people about how to use the benefits you provide.
• Transparency for employees. Adding online tools for employees to access their benefits plan could help with preventative medicine and allow your people to see what is available to them.
• Customized solutions. Employees are more likely to use plans that fit their own needs, instead of a prepackaged plan fit for all employees.
• Underutilized programs. Take a close look at what is being offered to employees and what they are actually using.
• Data analysis. Before making changes, small or big, a thorough analysis of your business’s data should be completed.

Your benefits should match your goals, always.

Every business’ financial situation is different, and therefore the changes to your benefits will be different too. For instance, if you need to reduce your spend by half or more, making small changes may not be in the best interest for your business. On the other hand, if you only need a 10% reduction in the short term, the slow and steady approach is practical. 

We have clients at both ends of the spectrum and everywhere in between. 

When we make multi-year plans, we assess as we go. We stay agile in our response to the data and industry or regulation shifts, making sure the structure of the plan always matches the goals of the business.

At the end of the day, whether you are looking to make large changes quickly or you are looking to make small, impactful changes slowly, you need to challenge yourself. We can help. We help build strategies that are designed specifically for your business, culture and employees so you can deliver the best for your people.

We are currently on track to save our client over $200,000. A significant advantage in a post-pandemic workforce where recruiting and retaining talent has become a difficult task for our HR departments.

Sourcing hidden revenue within a company’s benefit plan isn’t easy and often takes the knowledge of several external professionals working together to achieve. After all, HR already has a lot to do and because employee benefits are incredibly confusing, we can’t expect our HR teams to generate this type of revenue alone.

Sometimes we meet HR managers that are hesitant to work with us because they think we are going to make big changes to the company’s benefits plan. They become worried because they don’t want to take the heat from unhappy employees or become swamped with additional workload. In fact, there was one point where our client’s HR manager wanted to fire us!

Granted, there are a lot of ups and downs in implementation, such as introducing upfront changes, staying compliant with bylaw and regulations, and educating and helping employees adapt to the new plan. 

But with help, changes in a benefits program can prove to be a financially successful decision.

Putting that revenue to good use.

By allocating those dollars more effectively you could lower deductibles or increase wages, easing stress for some employees. Statistics show that the average person has only $440 in savings and with health insurance deductibles in the thousands, many employees are left wondering how they can afford these out of pocket charges. 

Using the revenue that could be hidden within your benefits plan can decrease the burden of those costs, increasing overall employee job satisfaction and alleviating difficulties for HR long term by improving retention and recruitment.

We have a full team of professionals to help your HR department achieve significant savings, sometimes — hundreds of thousands of dollars. We have attorneys, HR specialists, Cobra specialists, pharmaceutical providers, medical management, benefits administration, concierge services, accountants, CPA’s, and CFO’s on our team of experts.

Surpass your benefit goals.

The ability to offer competitive wages and a benefits program tailored to your unique workforce can contribute to a positive culture and produce a business that attracts and retains top talent. Employees may even seek you out through word of mouth. 

Experienced advisors can help your company and your HR department in many ways such as:

• Assignment of support roles to facilitate and compliment your HR team with the administration of the benefits program.
• Look for ways to save costs and increase revenue by implementing effective strategies.
• Design a benefits plan unique to your workforce, representing your people’s specific needs.
• Maintain compliance with benefit laws and regulations.
• Assist with benefit questions, new hire intakes and review of complex paperwork, which can allow HR to focus on other critical duties.
• Help avoid common difficulties in administering a benefits plan by introducing processes that prevent problematic errors.
• Overall, an advisor will help support HR, not supplant them.

As advisors, we provide advice and recommendations about your benefits and health insurance programs, working to stay within your budget, produce lower costs and increase employee satisfaction. 

Give HR some to lean on

If the pandemic is going to throw us one more curveball, HR’s struggle with employee recruitment and retention will be it. 

Your HR department is busier than you think, they could use someone in their corner to help navigate the complexity of employee benefits so they can get back to your most valuable resource, your people.

Employee benefits are a lot for one person to handle. If you want to discuss ways we can help your HR department, don’t hesitate to reach out. The difference could be thousands of dollars.

Employee benefits are one of your largest expenses and biggest resources for attracting, retaining, and engaging top talent. This is why your broker needs to carefully select and implement a clear, cost effective strategy for your business’ benefits program. 

Not only should your broker be offering the best strategy, they need to be transparent with you as well. You should have clear insights into how your plan is designed and how your broker is making decisions about what is best for your business and ultimately your people.

As an employer and business owner you have the right to access important data, stats and information about your employee benefits plans. The problem is knowing what questions to ask. 

Raise your broker’s eyebrows

As health insurance experts and advisors we have put together a list of questions to help you gain the knowledge you need to make sure you receive the most affordable, functional and cost effective benefit program.

Here are some key questions that you should ask your broker so you can better understand your plan and their process.

1. What are the biggest threats to our potential claims this year and what can we do to prevent or mitigate risk? 

Your broker should be able to point out specific risks from both your region and your population to take preventative steps to reduce the volatility of claims. These threats need to be managed proactively to avoid costs.

2. Are there specific high-cost claimants that we should be worried about? What conditions do they have that we should be monitoring?

They should have examples of members with chronic or accute conditions that both require high-cost and/or high-frequency care as well as maintenance medications. 

Your broker should be able to provide you with data that can help identify future high-cost claimants and recommend strategies that can improve care and lower costs for these members.

3. How can we ensure our members are getting to the highest-quality/lowest-cost care?

They may answer this question by discussing their proprietary doctor rating system which includes doctors who have agreed to certain billing practices and patient acceptance. They may also talk about “Value-Based Payment” which not only amounts to a very small percentage of the provider reimbursement, but also has very few actual quality metrics.

4. What opportunities can we seize to mitigate risk and reduce cost this year?

Your broker is most likely going to talk about the benefits of introducing diabetes and weight-loss programs or gym memberships. But they may miss the opportunity to discuss getting people to the highest quality of care more often as well as using predictive analytics, which can improve patient outcomes.

5. What changes can we make for our formulary to reduce prescription costs?

They may attempt to answer this question by recommending more generic drugs or mail-order opportunities, which may lower costs, but they will be missing the mark completely. 

Pharmacogenomics, international procurement and manufacturing assistance programs are all opportunities to keep the same necessary drugs for your population by buying them cheaper or differing cost completely. 

6. What J-Codes (Injectable Drugs) are hitting our medical plan? Would it be better for those to hit Rx instead? What is the main site of care for those injections?

If there are J-Code claims on the plan, and they answer this question, they will likely say that the best place for these codes to occur is on the medical side so your broker can utilize the “network discount”. 

In reality, running these drugs through the Rx side would present the ability to purchase the drugs more cost effectively or even defer the cost entirely. Not to mention, the site of care could move to a non-hospital environment, which would cost less and reduce infection likelihood.  

7. What Rx rebates are being applied towards our administrative costs? How much are they exactly?

Your broker should be absolutely transparent about these costs and the revenue they receive because they could be making money on recommendations made as well as from your group policy. For example, your broker could form a coalition with Pharmacy Benefit Managers and advertise prices as the best deal for your business, which may not be the case at all.

Essentially, if your broker is not clear about costs and revenues made, they could be making more money with their recommendations, above and beyond the fees you’re paying them.

Get the answers you need

If your broker can’t answer the questions you have about your benefits program, or is hesitant to answer them, your relationship may not be mutually beneficial and your benefits might not be working to their fullest potential. 

If this is the case, speak to a trusted advisor who can help get the data you need. You have the right to know how your broker is making decisions for your business, and how much they are making on those decisions. Otherwise there is no way of knowing if your benefits plan is fair for your business or your people.

Employee benefits are considered one of the biggest expenses a company has, they should also be considered one of the biggest assets. Because a well designed, cost effective plan has the ability to positively influence employee recruitment and retention.