BETHESDA, MD – Employers looking to save money on the health benefits packages they provide to employees should consider self-insuring, according to a new report from the Health Performance Management Institute.
The report, "Measure, Manage, Engage and Save: An Overview of How Healthcare Performance Management Works," provides insights from experts in the field of employer-managed insurance plans and details the leading reasons why a growing number of employers are moving away from the more traditional third-party payer approach.
Perhaps the biggest reason employers choose to self-insure is because their insurance plans provide very little information about key cost components of the plan and how the health of their workforce affects their healthcare costs. Employers thus have little visibility or control over what they can do to address the specific healthcare needs of their employees. Further, the decision by an employer to self-insure need not be made solely on the size of an organization.
"One of the first things that must be overcome in the healthcare marketplace is the barrier that the insurance industry places in front of purchasers of healthcare to access meaningful data," said Scott Haas, vice president at Wells Fargo Insurance Services USA. “In reality, the funding mechanism chosen by any given plan sponsor should be a function of available data being turned into information and business decisions made that are prudent and founded on knowledge. Being fully insured or self-insured should not be a decision driven by the size of an employer group, but rather the chosen risk transfer method based on consideration of all facts related to the group’s own situation.”
According to the HPM Institute, the core problem is not a lack of claims data but a “lack of will to provide data to stakeholders” from which employers can make informed decisions on how to manager their health benefits.
“Insurance providers (carriers), who receive comprehensive contracts to cover a workforce pool in a healthcare plan, severely limit how much – if any – information is shared with employers who pay their premiums, often citing privacy laws and other risk-management concerns,” according to the report. “Thus, while paying third-party insurers to assume total responsibility for managing health claims – and risk – may seem convenient, it comes at a price: Employers sacrifice access to vital, aggregated information about employee health.”
To help reverse this trend, the HPM Institute is working to promote and develop a new corporate discipline called healthcare performance management. This discipline borrows heavily from the concepts of Six Sigma, which has been employed by many companies to streamline a host of business processes.
The mission of the institute is to help executives understand how to use technology and management principles to effectively manage healthcare benefit costs and to introduce them to the so-called four pillars of HPM:
- Measuring the key cost elements of healthcare spending;
- Managing key aspects of healthcare spending and important health outcomes;
- Engaging employees and family members in material health improvement initiatives; and
- Saving money through cost-avoidance, better workforce health and improved productivity.
