Innovation and Self-Insured Employer Plans

About 175 million people are covered by an employee health plan through their job or the job of a loved one.  More than half of people in employee health plans work for an employer that is self-insured or partially self-insured.  Self-insured plans are ones that are subject to federal law rather than the patchwork of state regulations that insurers must follow.  When employers self-insure, they take on the risk of their employees medical needs and generally have stop loss coverage to guard against any one worker or dependent have exceptionally high medical bills. Whereas insurance is somewhat of a stodgy business, employers themselves are looking for solutions rather than premium hikes year-after-year.  Most of the innovation that occurs in health coverage are experiments being conducted by self-insured employers. These include decision-support tools to make enrollees more informed consumers of medical care. Employers are dumping a ton of money into employee Health & Wellness programs, health risk assessments and chronic disease management.  A few employer plans, like North Carolina-based like HSM Solutions, are outsourcing some medical care for high cost procedures to countries abroad.  CalPERS, the public employee union, has initiated experiments in reference pricing to provide beneficiaries an incentive to seek out lower-cost providers.  These are all examples of self-insured plans looking for solutions to the problem of high medical costs.

Over the course of the past several years I’ve had the opportunity to talk to entrepreneurs about transparency tools designed to make medical care less costly for self-insured employers. For example Healthcare Bluebook is a web-based solution to help consumers and employers find better prices for medical services. Compass Professional Health Services is another firm that works with self-insured employers to steer workers to doctors and hospitals that provide more value for the investment.  Some firms, such as Vitals, lets you search for a doctor or search for the price of a medical service. Some of these are largely web-based, while others (like Compass) is a high touch service that assigns enrollees a personal representative.

The other day I had the chance to have lunch with both the president and CEO of Integer Health. Not unlike many of the firms mentioned above, Integer Health uses self-insured clients’ claims database to compare prices of area physicians and hospitals. However, Integer Health goes farther than merely providing employer plans with price transparency tools.  Its patented proprietary data analytics compares providers based on the entire episode of care.  For example, a former neighbor of mine used to complain his wife’s Medicare primary care provider never treated anything. Her doctor merely referred every problem to a specialist regardless of how trivial.  Integer Health’s analysis can easily identify primary care providers who won’t take the time to help their patients and merely refers them to a specialist. This is a very costly way to provide primary care. It requires multiple doctor visits and duplicate costs and tests.  The analysis can also identify providers who pad their bills with unnecessary medical services compared to their peers.

Integer Health has another unique feature that I haven’t heard discussed anywhere else. The firm integrates the claims database with human resource records to assess worker productivity. Explained bluntly: how effective is a given doctor at getting a patient back to work? That is the ultimate goal employee health plans. Physicians that can’t see a sick worker on a timely basis; or cannot schedule a timely follow up after a treatment (and release them back to work) could cause the worker to stay off work (or on workers comp) longer than necessary.  Lower-priced hospitals and surgeons, who have longer healing times, costs more than higher-priced hospitals and surgeons whose patients heal quickly. This information helps Integer Health assess productivity and use it to gauge the quality of medical care.

Some policy wonks see employer plans as the solution to affordable health care, since workers are eligible regardless of whether they are high-income or low; whether they are old or young; sick or healthy (although if you are sick you may lose your coverage if you cannot work). At the same time, may economists see employer coverage as the route cause of the problem that caused the overuse of third-party payment, a process that originated during World War II when the Kaiser shipyards were allowed to provide health coverage tax free. As a result, third party payment began driving up medical spending and resulted in bureaucratic medical care. Regardless of where you fall in the debate, employers are looking for ways to slow spending.  A variety of experiments are good for all coverage since successful experiments can be adopted by insurers and governmental payers.

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