Promoting wellness: Saving the big money

At HCH Administration, a full-service third party administator, the approach is to help clients identify areas where taking a proactive approach and investing in employee wellness can save considerable dollars in the long term.

Studies show that 50% of people with chronic conditions are not taking their medications or receiving regular medical care to manage their disease, primarily due to the costs involved.

If a TPA can convince an employer with $15 million in health care costs to invest a portion of the overall medical cost back into wellness programs (such as providing free medication or regular office visits to patients with chronic conditions), that investment will help avoid numerous $50,000 to $100,000 claims for emergency room visits, hospitalizations and other health care expenses over the next 12 to 18 months.

For example, providing patients in the early stages of diabetes with free test strips to monitor their blood sugar levels is far less expensive than the results of potential noncompliance with the monitoring.

By investing $500 in these maintenance tools, the plan sponsor can save $5,000 in future expenses that can be generated by a diabetic who does not regularly monitor her condition.

The value of wellness programs should not be understated. Investing back into health for future savings is like a 401(k) account that increases in value with each year. We need to take a different approach to health care than we have in the past.

You can only shift so much cost to the patient. You can only get so many discounts from providers. These types of changes can force patients to skip preventive and maintenance care because of the cost, and that can lead to costlier chronic and emergency care in the long run.

Some of HCH's clients are taking baby steps, while others have jumped in, requiring physicals and participation in appropriate disease management programs and reducing benefits for those workers who opt to not participate. We're seeing the effectiveness of these programs, especially when employer groups focus on the 20% of the population that is consuming 80% of health care dollars.

Comparing apples to apples

In early 2006, HCH was affected by insurance carriers' promises to provide clients with double-digit savings through provider discounts. In response, HCH developed strategies to countermand this competition. There's more to plan management than provider discounts.

When a carrier promotes greater potential savings due to deep provider discounts, I advise the employer group to ask the carrier to re-price 100 of their hospital claims - including both discounted and outlier claims - and 100 of their physician claims.

This exercise provides an apples-to-apples comparison of purported carrier savings vs. those that HCH is achieving for its clients.

The results typically show that the true discount is only giving the employer a two to three point advantage, rather than the 10 points that carriers often promote.

Once we can prove to clients that the differences in realized discount savings are less than what carriers are promising, we have the opportunity to help clients understand the full picture with regard to stop loss numbers.

In many cases, the aggregate factors can be misleading, with underwriters stating one number, and the carrier's sales team providing another much higher number.

The factors should be the same and should equate with the level of discount being provided; otherwise, it is another indicator that potential discount savings are being inflated.

Employers must remember that provider discounts are only one part of a much bigger plan management picture. Meanwhile, TPA administrative fees are typically 50% of those charged by carriers.

Paul Wann is chief operating officer for HCH Administration, a third party administrator based in Peoria, Ill. - E.B.N.

Five tips for finding an effective TPA

1. Look for a TPA whose goal is to be a good steward of the plan funds. A quality TPA is more than a transaction machine; it should provide innovative solutions to help the plan save money and manage risk.

2. Ensure the TPA is attempting to provide discounts on all claims, not just PPO claims. The TPA's goal should be to secure discounts on 80% of all claims processed.

3. Find a TPA that manages claims from beginning to end. This involves eligibility, claims payment, utilization review oversight and discounting of claims. It allows more comprehensive oversight of plan dollars and risk.

4. Look for a TPA with the right strategic partnerships. If the TPA has invested time and money in researching the best partners, it will have a deeper knowledge and understanding of health care and how to reduce risk.

5. Look for a TPA that pushes technology and is SAS70 certified, allowing a transparency and integration with health care partners and certification of the proper operational checks and balances.