4 Cost-Saving Strategies to Optimize Your Fully Insured Health Plan

Fully insured health plans are famous for their painful annual premium increases.

As healthcare costs continue to skyrocket, many employers with fully insured health plans have been exploring the possibility of switching to self-funding in order to gain greater control over their spending.

The Advantages of a Fully Insured Employer-Sponsored Health Plan

However, self-funding isn’t the best fit for every organization. Due to their low level of financial risk, predictable month-to-month expenditures, and outsourcing of administrative and managerial responsibilities, fully insured plans will remain the go-to healthcare funding model for hundreds of thousands of employers for many years to come.

With that being as it is, plan sponsors should be aware of the ways that they can maximize the impact of their health dollars within a fully insured framework. While the potential for cost containment policies within a fully insured plan are somewhat restricted by design, there are still multiple initiatives that employers with this plan type can enact to reduce their health spend without compromising on coverage and employee wellbeing.

Fully Insured Health Plans: 4 Cost Containment Techniques You Need to Know

1. Participating Insurance Policies – Many carriers offer fully insured plans with a “participating fully insured policy.”  This type of fully insured contract is identical to a traditional fully insured policy except that it includes a retrospective review, or settlement, a few months after the end of the plan year. If this review finds that the plan’s claims were lower than anticipated, the carrier will refund the plan sponsor a share of the savings.
   

   In this situation, plan sponsors will typically receive up to 50% of said savings in the form of a dividend.

   The timing of this process usually requires the plan sponsor to confirm their renewal with the carrier before receiving this dividend. Participating insurance policy plan sponsors who decide to switch carriers will usually forfeit their access to this dividend. If the actual claims run higher than expected, then there is no additional risk to the plan sponsor. No additional payments will be owed to the carrier for the previous plan year, but the renewal will likely reflect the higher-than-expected claim experience in the form of a higher premium increase.

2. Tiered Network Plans – Some carriers sort healthcare service providers into tiers based on reimbursement rates and quality metrics.
   • Tier one providers are in-network, rated as providing high-quality care at a lower price point, and offer the fullest level of coverage.
   • Tier two providers constitute the rest of the carrier’s network and typically provide benefits that are 20-30% less rich than those in tier one.
   • Tier three providers are those outside of the carrier’s network and require either substantial cost sharing or provide no coverage at all.

   By socializing this information with plan participants and encouraging them to prioritize providers in the upper tiers, you can enable them to avoid waste and unnecessary claims costs.

3. Value-Based Insurance Design – Employers can craft internal policies that reduce practical and financial barriers for members to seek care and encourage plan participants to adopt healthier lifestyles. Some possibilities in this space include:
   1. The adoption of telemedicine solutions, which have dramatically expanded over the last few years are able to be covered by employer health plans until at least December 31st, 2024. Telemedicine providers are often much more convenient and less costly than urgent care clinics or emergency rooms.
   2. Providing plan options that cover the cost of preventative medicines and low-cost maintenance medications that help with managing chronic conditions and reduce the likelihood of health crises. This involves a modest short-term expenditure that can potentially result in medium-to-long-term savings.
   3. Providing incentives for beneficial lifestyle improvements, such as subsidized gym memberships.
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4. The Elimination of Out-Of-Network Benefits – This step can offer significant savings on premium costs without tremendous impact to employees, since most national networks capture over 95% of utilization. One policy option is for employers to create multiple plans: A “buy up” plan that offers out-of-network benefits and a “buy down” plan without out-of-network benefits that maximizes savings. In this scenario, employees who desire out-of-network coverage can still access it, albeit at a higher premium.

If implementing these tactics still doesn’t deliver the savings that your business needs, it may be time to consider transitioning to another health plan funding model. A self-funded model enables organizations like yours to pursue strategies like reference-based pricing, insurance group captives, and carved-out pharmacy benefit managers in order to contain their health plan costs.

For information on these and other strategies, read our Cost Containment Playbook for dozens of actionable money-saving tactics.