How to Transform Your Self-Funded Plan from Good to Great

How to Transform Your Self-Funded Plan from Good to Great

Kevin Schlotman

Mar 10, 2015

How to Transform Your Self-Funded Plan from Good to Great

Whether your organization has self-funded its health plan for years, or you are just now taking the plunge into the waters of healthcare self-direction, driving continuous improvement in plan performance is critical to success. A successful health plan may look like many things to many different people, but most will agree that it would have the following characteristics: healthcare expense trends in the low single digits; improved outcomes for employees and their families; and enhanced benefit design and quality. Health plan veterans might chalk up these outcomes to “a good year” and “lucky choices” by their employees. The probability of improving benefit design and/or quality, well that’s a practical impossibility … Or is it?

With the right partners, starting with a Third Party Administrator (TPA) driven to innovate and promote continuous improvement, these criteria for success are not random or lucky. Employees can enjoy better benefits, with better outcomes, all without breaking the budget – or at least keeping costs in check. What’s absolutely true is that “business as usual” won’t achieve these objectives. It will take an employer willing to do some things differently, and solid partners committed to innovation. What follows is a high-level blueprint that, if properly implemented, can lead to unparalleled outcomes. 

To many, this sounds like a lot of work. With a business to run, you may feel unable to dedicate all your time running a health plan. You’re right about the second part. Integrating these strategies within your plan does not have to be a burden for you or your team. You will certainly need to champion some of these programs within your organization; however, with the right TPA and program partners, you don’t have to spend a ton of time running them.

Implement Population Health Management

Population Health Management (PHM) is the critical core component that all self-funded plans must consider if they want to improve results. No, I am not talking about participation based wellness, walking and fitness challenges. Those are fine and useful pursuits if well implemented. Their results are impossible to measure, however, making any proposed ROI a difficult sell to management. I’m talking about effectively using your plan’s data to improve your risk profile. PHM works as the “Big Data” application within your health plan, with an improvement on the not-so-new legacy Predictive Modeling programs. They may start out the same, but the results are far more compelling. 

No surprise, PHM starts by identifying the most significant chronic conditions within the plan that will drive large dollar claims. Those individual patients are enrolled in a comprehensive case management program. Sounds familiar – except that a leading edge PHM program will go a step further. Rather than monitoring these folks and warning of claims to come – clinical case managers are working to make sure that any treating physicians are actually following evidence-based protocols to treat the condition. They also drive the next phase of the program improvement project – patient participation in value-based plan design.

The next group identified in a quality PHM program are those patients at risk for an adverse drug-to-drug interaction. Informal polls of our four most utilized Pharmacy Benefit Managers, as well as our experience implementing PHM programs, indicates that somewhere between seven to 15 percent of the people on your plan that take monthly medications have been prescribed two drugs that shouldn’t be taken together. Most of the time these scripts originate from two different doctors, but not always. In many cases, the result is simply that the drugs are not as effective at managing the patient’s chronic conditions as they otherwise would be. Other times, the interactions could make the patient sick enough to require hospitalization, or worse. A best in class PHM program identifies these risks and eliminates them via direct contact with the patient and prescribing physicians.

The final PHM step is the hardest to achieve. It involves identifying the individuals within your plan that need help managing a chronic condition (not hard, the data tells us who’s in trouble) and engaging them in a program that will get them on track (this is really hard). This is where it’s critical to select a partner that has a proven track record of making PHM work. Organizations like Healthcare Strategies and Quantum Health have proven effective. There are certainly others – effective regional players that might be right for your plan. An effective partner here is a must, otherwise the program will never get off the ground. 

If you are considering a local or regional partner, this engagement program should never be managed by a hospital or physicians group. Their interests and the interests of your plan are not aligned. Healthcare providers are businesses, regardless of their philanthropic mission statements. Their job is to bill patients for healthcare. Your job is to find ways to not pay providers by helping your employees reduce their need for the healthcare those same providers are selling. Don’t fall into the trap of partnering with the politically prominent local healthcare system. 

Once data analysis has identified folks with chronic conditions, the heavy lifting begins. Counselors work to connect with patients with unmanaged hypertension or uncontrolled diabetes and encourage them to manage their health. Education and engagement are critical to the long-term success of this effort. This is why it’s important to partner with an organization that has nurse counselors that are trained in techniques that enable them to get and keep your employees - and their family members - involved in maintaining their own health. This includes not only filling and taking medications as directed, but effectively encouraging otherwise healthy enrollees to “take advantage” of the preventive services provided by your plan. 

Skeptics contend that engaging employees in this type of a program is far easier said than done. This is where plan design meets Population Health Management. While these programs are not the same as “wellness programs” as they are typically described, they absolutely qualify as “wellness programs” from the perspective of the Affordable Care Act. The most effective PHM programs involve incentives that give your employees a reason to participate. Most commonly, incentives tie participation in the program to premium contributions. Those that participate are rewarded, or pay less. Those that choose otherwise, pay more. It’s important to follow all of the rules regarding wellness programs and incentives, particularly in light of recent Equal Employment Opportunity Commission (EEOC) activities. Any well-designed program will address regulatory concerns, and drive results.

You might be asking:  “Why go to all the trouble? What’s the payoff?” The Wellness Council of America contends that 40-60 percent of your claims expense is the direct result of chronic, preventable illness. An effective program that makes a just a 10 percent dent in these costs will save four to six percent. In fact, Quantum Health’s website puts their experience at seven to eight percent. Healthcare Strategies reports approximately eight percent, on average, and trend reduced to the low single digits. If that’s not enough to pique your interest, try this:  Return on investment is actually measurable. Data analytics in a best in class program not only identifies employees and patients that need help, it also establishes key benchmarks that can be used to reliably demonstrate the success of the program – or if changes need to be made.  Baseline statistics will establish measurable events, such as inpatient hospital admissions, length of stay, and the number and cost of events associated with chronic conditions – all of which can be compared year over year to establish whether or not the plan is having the desired impact. 

In Conclusion

Introducing a well-conceived, incentivized Population Health Management program is a crucial first step toward gaining control of your health plan’s ever-escalating costs. Your PHM will work to drive long-term reductions in cost associated with preventable disease. The next steps attack large dollar claims:  Value Based Plan Designs including a Centers of Excellence Strategy, targeted claim negotiation and administrative strategies that attack the slow leaks - like subrogation and coordination of benefits - that plague all plans.

About the Author

Kevin Schlotman, is the Director of Employee Benefits at Benovation, a healthcare Third Party Administrator in Cincinnati, Ohio. Benovation specializes in innovative, customized healthcare plans for employers with 25 or more employees. For more information or to contact the author, visit or email [email protected]