Why Some Companies Are Turning to Self-Funded or Value-Based Health Care

Why Some Companies Are Turning to Self-Funded or Value-Based Health Care

In the face of growing health care costs and an uncertain future for the Affordable Care Act, many US employers are looking for new ways to provide quality health benefits for their employees at a reasonable cost. At Employee Benefit News, Paul Johnson recommends that small and mid-sized employers, in particular, consider self-funded plans as an alternative to traditional group health insurance:

To balance the scales and create a competitive advantage, more companies are turning to healthcare plans based on a self-funding model that offer more flexibility, customization and cost-savings while still improving the quality of care. Self-funded plans have been almost universal among large employers for quite some time, yet only in recent years have more HR departments at small- and mid-sized companies started to realize the benefits. …

Unlike more rigid traditional insurance, companies can customize their offerings to address specific needs, such as investing in injury and chiropractic care in industries that require physical labor to robust maternity benefits for those with younger workforces.

Another increasingly popular option is value-based care. Also at EBN, Sam Ho and Tim Cappel explain how value-based health care programs work and why employers are choosing them:

Under value-based care arrangements, the healthcare providers that employees use are paid for achieving certain quality outcomes and demonstrating that they’re improving people’s health, rather than getting paid solely for the number of services they provide to patients. In other words, they’re paid for value over volume. Value-based care arrangements can come in many forms for care providers, including performance-based contracts that tie specific portions of their compensation to achieving certain quality measures, or accountable care organizations that fully integrate both payment models and clinical services with the health plan. …

One of the value-based care arrangements gaining interest among employers, especially companies that self-fund their health plans, is called a bundled payment. The bundled payment method reimburses a healthcare provider or hospital for a defined episode of care under a single fee or payment. For example, all services immediately prior to, during and after knee replacement or cancer treatments are sometimes being lumped into a bundled payment. This is a shift away from the common fee-for-service structure in which a care provider is paid separately for each treatment, appointment or test during a treatment plan, generating multiple claims within a single, broader episode of care.

Pointing to Willis Towers Watson’s Best Practices in Health Care Employer Survey, released late last year, SHRM’s Stephen Miller digs deeper into the value-based plan strategies companies are pursuing:

  • Establish centers of excellence for specialty services with health plans, separate providers or third-party vendors. Centers of excellence (COEs) are hospitals or clinics deemed to offer high-quality, cost-effective care. Employers and insurers typically offer workers low-cost or free care if they have their surgery performed at a designated COE, as the Lowe’s Cos. health plan is doing with the Cleveland Clinic. Currently, 45 percent of large employers are giving employees access to COEs for specialty services such as back, knee, cardiac and infertility issues. This is up from 37 percent of employers that provided access to COEs in 2015. Another 32 percent are planning to do so by 2018.
  • Implement high-performance networks. Twenty percent of employers offer networks of high-quality, cost-effective medical service providers that agree to provide care for a specific population at lower cost. The use of high-performance networks is up from 11 percent in 2015, with another 39 percent potentially adding them over the next three years. Of employers that offer such networks, about half reduce employee cost-sharing for care within the network.
  • Contract directly with service providers to secure improved pricing. While few employers are currently contracting directly with service providers, nearly 16 percent of large employers are considering this approach. Among the service providers they identified as potentials for direct contracting are COEs, accountable care organizations and practices that operate as a patient-centered medical home using a primary care physician’s office to coordinate services provided by health care specialists.