Becker's Spine Review

27 Executive Briefing Sponsored by: How Self-Funded Health Plans Boost Patient Satisfaction with Medical Innovation I magine the world where employers support and pay for med- ical innovation by directing employees to providers who use clinically and economically proven medical innovation. That future may not be far off; 150 million of 200 million commercial- ly insured Americans receive health insurance via their employ- ers, according to Kaiser Family Foundation, and many compa- nies with self-funded health insurance incentivize employees to visit specific centers of excellence for elective procedures based on clinical quality and cost partnerships. These self-funded health insurance plans catapult employers into the value-based arena, and employers are active in iden- tifying medical service economics, from overall disease man- agement to making decisions for which medical services and procedures they cover. "The self-funded employer sponsored health plan is most prev- alent among commercial policies," says Vincent Zeringue, Para- digm Spine's vice president of business development West. The self-funded health plan In traditional fully funded plans, payers add a profit margin to premiums. Self-funded plans are attractive to large companies because employers contract directly with payers to cover em- ployees. Within the self-funded plan model, employers pay pay- ers a limited fee to help with administrative management of the plans. Self-funded and fully funded plans both engage larger payers in some capacity; economic-drivers are the main differ- ence between the two plan models. "[Self-funded] plans allow employers to recapture margins that would otherwise be ceded to an insurance company, when pro- viding administrative services, in the context of a fully funded insurance plan," explains Ahmad El-Naggar, Paradigm Spine's director of corporate initiatives. Employers take on full risk with self-funded health insurance plans, collecting premiums from their employers and putting the money into a collective account. As employees utilize healthcare services, employers debit the account. Here are the essential characteristics of both health plan types: Fully-funded health plans • Company pays the payer a premium, which is valued at a fixed rate for a year based on the number of enrolled em- ployees each month • Monthly premium changes during the year if the number of enrolled employees shifts • Payers collect premiums and pay healthcare claims based on coverage benefits • Employees pay deductibles or co-payments mandated by the policy Self-funded health plans • Often large employers operate their own health plans • Employers will self-insure to save the profit margin payers add to premiums in fully funded plans • A self-funded plan consists of fixed costs, such as adminis- trative expenses and stop-loss premiums • Variable costs consist of healthcare claim payments • Employers may opt to purchase a stop-loss policy to reduce liability and ease risk in cases of high loss "Employers choose to self-insure for a couple of reasons. Fi- nancial risk or risk tolerance is a significant factor in whether a company self-insures or not. Self-funding healthcare is less ex- pensive and provides employers the most options to customize benefit plans for employees," says Mr. Zeringue. "The difference between the two [plans] is there's an economic advantage with the self-funded." Self-funded employers are much more aware of the econom- ics surrounding covered medical procedures compared to employers offering fully funded plans, said Mr. El-Naggar. An employer's human relations director or benefits manager often oversees self-funded plans provisions and is permitted to pro- vide "case-by-case policy approvals" for medical procedures. This decision to "approve" often correlates with a procedure's or innovation's demonstrated clinical outcomes, and more and more, the addition of proven economic outcomes, Mr. El-Nag- gar says. Employers are more aware of procedures and innova- tions that demonstrate clinical and economic advantages. How medical innovation ties in Transitioning away from a fee-for-service world, the healthcare environment is coming to demand higher quality at lower costs. Medical innovation that demonstrates clinical and economic va- lidity to improve a patient's condition is positioned to answer both of those needs. To achieve the proven innovation label, the service or technology must achieve positive long-term results, documented in peer-reviewed literature. However, with the tran- sition to value-based care, cost matters now, too.

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