In recent years, employee benefits costs, including pharmaceutical, medical, and stop-loss expenses, have risen faster than overall inflation. As new specialty medications and uncertainty in our political landscape introduce further complexity, organizations will need to refocus their efforts to maintain financial discipline.
Controlling costs of employee health insurance benefits is challenging, especially for organizations that aim to be benefits leaders and design competitive, self-funded benefits packages. However, this category can be a critical component of an organization’s total compensation package and overall approach to non-labor cost management. Below, we explore opportunities to achieve cost savings by revisiting traditional benefits management models, the value of augmenting current resources, and developing effective management strategies.
Revisiting Medical Benefits Management
It is essential that benefits plan administrators manage the risk of large claims. These claims have a low level of predictability and high variable cost, and they typically involve a small number of plan members.
Third-party administrators, stop-loss carriers, and pharmacy benefit managers (PBMs) may claim to manage the risk of large claims. However, they seldom cite a return on investment (ROI) or disclose the actual resources dedicated to managing complex, high-cost claims.
Plan administrators should consider actively engaging with a third-party professional management organization to help appropriately manage large claim risks. The ROI in this area can be exceptional, and the upgrade in case management can improve employee experience.
Controlling PBM Costs
Plan administrators should carefully weigh their options when considering PBM solutions. While it is exceedingly difficult to identify all the variables involved in pharmacy benefit management, there are fundamental factors administrators can focus on to help manage costs.
For example, rather than focusing on low-net-cost medications, PBM formularies often prioritize maximizing rebates from drug manufacturers by including brand-name medications. Organizations may be able to drive additional value for themselves and their employees by instead designing flexible formularies that include lower-cost medications.
Another strategy that can help drive value is investing in resources to help educate employees on lower cost options, track trends, and review compliance in high-cost categories, e.g., Ozempic and other GLP-1s.
Identifying and addressing these controllable cost factors can uncover potential savings of 10% to 20% over existing legacy arrangements, as well as help improve employee satisfaction.
Implementing an Effective Plan Administration Strategy
Effective management strategies can both enhance outcomes of the above strategies and provide complementary benefits. Plan administrators should consider:
- Stop-Loss Carrier: Engage with a stop-loss carrier that understands the importance of third-party case management and utilization management solutions utilized by the plan.
- Monitoring: Establish and monitor key performance indicators (KPIs). Consider retaining an actuary to establish and review these KPIs.
- Executive Oversight: Review KPIs during executive meetings and benefits governance sessions. Evaluate plan design for utilization controls and cost benefits for employees and their families. Assign finance leadership to collaborate with benefits leadership to identify strategies beyond plan design to reduce cost drivers, such as claims experience, broker fees, and administrative fees.
- Compliance Reviews: Conduct contract administration for all carrier products, including periodic reviews of third-party administrator claims adjudication.
How Forvis Mazars Can Help
Our non-labor cost management team at Forvis Mazars has helped healthcare organizations identify and execute cost savings opportunities for over three decades. To learn how we can help you benchmark your performance, achieve savings available for your organization, and maintain financial discipline, reach out to our professionals today.