Healthcare costs will continue to rise. The CMS projects that over the next decade healthcare spending will increase 5.8% per year.
Healthcare costs are much higher than they should be‒30% of all healthcare costs are due to poor or ineffective care.
Healthcare costs are highly concentrated. Just 5% of the population accounts for 49.5% of all personal healthcare spending. In keeping with the 80/20 rule, 20% of the population drives 81.2% of those costs.
Everyone focuses on chipping away at the 5.8% annual increases. At IntegerHealth, we attack the 30% of healthcare costs due to poor or ineffective care, while improving the care that the employees and other plan participants receive.
Employers that self-insure their healthcare still pay insurance companies to administer their claims through the insurance companies' provider networks (when performing these functions the insurance companies are called Third Party Administrators, or TPAs). The employees even carry the insurance companies' cards and probably don’t even know that their plans are self-insured. The employers, however, not the insurance companies, pay the healthcare claims.
In the past, only large employers could self-insure because they needed a large employee base to absorb the occasional catastrophic claim. Today, however, small employers are self-insuring too, using stop-loss insurance to limit their losses.
Why self-insure? It can be cheaper and more flexible than buying traditional insurance.
After employers self-insure they have few other options to decrease their costs.
Healthcare is not a commodity. Some doctors provide higher quality care than others, and cost often doesn't correlate to quality. High value doctors are not those with the lowest fees or who have agreed to the steepest fee discounts. Poor or ineffective care at low or discounted rates leads to higher, not lower, costs. In addition, treatment that extends an employee's absence from work (or returns the employee to work at less than full capacity) adds to that cost.
Lowest overall cost, with
The most favorable outcome possible, in
The shortest time.
Good healthcare costs less than bad healthcare because high value doctors have:
At IntegerHealth, we measure the productivity costs of employee absences in our algorithms. These productivity costs are an enormous cost in healthcare and can be several times the related claims costs. We do so by juxtaposing the claims data against the HR records, which is itself a conservative approach. The total absenteeism costs are much greater than just the direct absence costs as the indirect effects of an absence ripple throughout the organization causing disruptions and delays.
Benefit Set–The panoply of healthcare and related benefits that an employer offers to its employees, including the type of plan (HMO, PPO, etc.), the deductibles and co-pays, spending accounts such as FSAs (Flexible Spending Accounts), HRAs and HSAs, and PTO policies (Paid Time Off, e.g. vacation and sick days).
CMS–Centers for Medicare & Medicaid Services.
FTP–File Transfer Protocol, a standard network protocol for transferring computer files.
Fully-Insured–The traditional way for an employer to insure its healthcare plan and workers’ compensation program. When an employer is fully insured, the employer pays a premium to the insurance company. Out of that premium the insurance company pays the claims and its overhead, and hopefully has something left over as a profit.
HDHP–High Deductible Health Plan.
HIPAA–Health Insurance Portability and Accountability Act, a law that sets out privacy standards for patient medical and other healthcare records, which are often referred to as PHI for Protected Health Information.
HRA–Health Reimbursement Arrangement (sometimes called a Health Reimbursement Account), similar to an HSA, except that only the employer funds the reimbursements of the employee's healthcare costs and any money in the account belongs to the employer, not the employee. A disadvantage of an HRA compared to an HSA is that the HRA is subject to the non-discrimination rules so that the employer must ensure that it is not reimbursing one group of employees (e.g. executives) at a greater rate than another group.
HSA–Health Savings Account, an account funded by an employer, an employee, or both, from which the employee can pay healthcare expenses. Employer contributions to the HSA are not taxable income to the employee. Similarly, employee contributions to the HSA can be deducted from the employee's paycheck on a pre-tax basis.
Non-Subscriber–An employer that has opted out of the statutory workers’ compensation system.
PBM–Pharmacy Benefit Manager, the third party administrator for a prescription drug program.
PEPM–Per Employee Per Month, a basis for charging an employer for a service.
Portal–An entrance point into a secure internet website. IntegerHealth’s portal is mobile-enabled so that it can be easily used on a smart phone or tablet.
Presenteeism–The inability of an employee to perform fully his or her job because of a medical issue. The classic example is a police officer or firefighter returning to work on desk duty only. At IntegerHealth, we only value absenteeism, not presenteeism, when ranking doctors and other providers because that is a more conservative approach.
Productivity Costs–The costs to an employer of employee absenteeism and presenteeism because of healthcare issues. These productivity costs are an enormous cost in healthcare and are often several times the related claims costs.
QScore–Quality Score, the score that IntegerHealth assigns to each doctor and other provider for each diagnostic condition treated (e.g. back pain, asthma, etc.). The higher the score, the higher the value of the provider when treating that condition.
QScoreCard–The report generated for an employee on the IntegerHealth employee portal showing the high value doctors and other providers in the employer’s network treating a specific diagnostic condition located within the employee’s geographic area.
RAC–Recovery Audit Contractor, a service in which an audit is performed on claims to discover over-charges.
Self-Insured–An arrangement where an employer assumes the risk for its healthcare or workers’ compensation claims. When an employer self-insures it still engages an insurance company (referred to in this case as a TPA) to provide the network of doctors and other providers, process the claims, and send the employees their paperwork. The employer, however, merely pays the TPA a fee for these services and the employer bears the risk of paying the claims.
SOC–Service Organization Control, standard reporting promulgated by the AICPA (American Institute of Certified Public Accountants) concerning the security of a computer network.
Stop–Loss Insurance–Insurance that applies above a specified threshold. For example, an employer that otherwise self-insures its healthcare could purchase a stop-loss insurance policy that covered any claim to the extent that the claim exceeded a designated threshold (i.e. the stop-loss amount), or that covered all of its claims to the extent that the aggregate of those claims exceeded such a threshold.
TPA–Third Party Administrator, the insurance company that processes a self-insured employer's medical claims and provides the network of doctors and other providers for the employees and their dependents.
Workers’ Compensation–State statutes that cover employee on-the-job injuries that eliminate the employer’s defense that the employee was at fault while setting the amounts that the employee may recover for the injury.