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The Importance of Tracking Health Plan Metrics

by Inoventive Solutions
August 27, 2024

As health insurance costs are rising at their fastest level in nearly 20 years, it’s important to have a clear idea of which metrics to track to ensure you’re seeing a good return on investment and that your employees are satisfied with their health plan.

Having the right metrics can also aid in negotiating better terms during the insurance selection process. This knowledge is essential not only for budgeting, but also for planning benefit offerings that meet the needs of your workforce and your firm.

While the goals for your health plan will differ from other employers, there are a number of common metrics that organizations track to gauge health plan performance. Your insurance company tracks the following metrics, and so should you:

Cost per member

This is typically calculated by dividing your plan’s total health care outlays (in a given month, for example) by the total number of members covered in the same period.

If you do this month after month, you can identify cost patterns and where you should focus on reducing costs without compromising quality of coverage and care.

Loss ratio

This is calculated by your group plan’s total premium divided by how much the plan pays out in claims. The ratio evaluates the health of your plan and is a key factor used by insurance companies when calculating next year’s premiums.

If your plan’s loss ratio is lower than the industry standard, that information provides leverage for you when negotiating premium increases and coverage changes.

You may also be able to forecast future premium increases by tracking your current and historical loss ratio.

Employee utilization

To track how often your employees use their health plans you’ll want to calculate the average claims filed per member. Divide the total number of claims submitted by the number of covered employees.

You can compare your average to the industry average utilization. If your staff are using their plans less frequently than their peers at other companies, it could point to issues, such as the plan being too costly, either via the employees’ share of premiums or out-of-pocket costs.

By digging deeper into claims, you can see where your workers are mostly going for health care services. If they are largely opting for high-cost providers, you can take steps to try to explain the long-run benefits of choosing another provider that may cost them — and the plan — less without sacrificing coverage.

Network quality and response times

It’s vitally important that your staff don’t feel they are stuck in a health plan that requires them to jump through hoop after hoop to get coverage.

You can get an idea of how well your plan’s network is meeting your employees’ needs by measuring the quality of your network. Network sufficiency, as it’s also called, consists of a number of metrics and factors:

  • The number of providers in the network,
  • Accessibility to medical care,
  • Claims response times,
  • Number of medical specialties available,
  • Appointment wait times, and
  • Costs of out-of-network care.

You can use this information to discuss options with us and your carrier for expanding coverage to help your employees better access care.

The takeaway

There are also other important metrics that you can use to get a sense of how well your plan is performing and serving your employees.

Health plan metrics provide you with valuable insights into your plan’s effectiveness and whether or not its expenses are running hot. Having this information can help you work with us and your group health insurer to craft a plan that meets the needs of your workforce.

One word of caution: If you plan to make changes based on what you find, it should be done with prudence and caution as you don’t want to compromise plan coverage or employee health.

"Woman
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What Workers Need to Know About Group Life Insurance

by Inoventive Solutions
August 20, 2024

Voluntary group life insurance is offered to employees as an optional benefit, and often employers will pay the small premium as an employee retention tool and to provide workers some peace of mind for their families.

There are various avenues for funding these group plans, and different underwriting criteria that can either reduce or increase the premium amounts.

The employer may cover the premium directly, or employees may share in the premium burden through payroll deductions after tax. In most cases, life insurance face amounts will vary from policy to policy and will usually be based in part on each employee’s base salary.

Taxation

Employers often provide group term life insurance to their employees at no cost to the individual, usually with a benefit equal to a percentage of base salary. 

Internal Revenue Code Section 79 governs the taxation of this employer-provided life insurance. An employee can receive up to $50,000 worth of coverage tax-free. 

The cost of any insurance above $50,000, less any amount paid for the insurance by the employee, is taxable income to the employee.

Types of group life insurance

There are three different categories for group life coverage:

Guaranteed underwriting – Automatic enrollment is granted to all eligible employees who apply. But they must meet eligibility requirements that the employer and insurance company negotiate.

Guaranteed underwriting requires little paperwork, there is no medical exam and it is issued quickly. It is usually only provided for large groups where employees cannot be denied.

To qualify for guaranteed issue, employers usually agree to a minimum percentage enrollment.

Simplified underwriting – There is no blood test or urine test, and no medical exam is required. Each applicant usually answers several health-related questions in addition to agreeing to a medical record background check.

Full underwriting – Full underwriting is usually required with small groups, with individuals or on larger face amounts. Medical exams are typically required, and a full examination is taken to satisfy the full records check requirement.

With full underwriting, it takes longer to complete the application process and not all people will qualify.

Why offer group life?

Premiums are typically quite low and that’s why employers will often offer this benefit at no cost to the employees.

It’s a great selling point when attracting new talent and retaining your employees.

Group life also benefits those employees who otherwise would not purchase life insurance on their own, either because of apathy or they may not be able to afford individual life insurance policies.

It also allows higher-risk individuals to be given life insurance coverage where they may have a harder time obtaining coverage on their own.

As a rule, experts recommend people purchase eight to 12 times their yearly wages in life insurance when working full time. If workers are young and have a long career ahead of them, experts recommend they purchase even more coverage. This is especially true for people with multiple dependents.

"Medicine
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Health Plans Covering Fewer Drugs, Imposing More Restrictions

by Inoventive Solutions
August 13, 2024

As prescription drug costs continue growing and pricey new pharmaceuticals add to health plans’ cost burdens, some carriers are starting to reduce the number of medications they’ll cover and are imposing new barriers to accessing the most expensive ones.

According to a new study by GoodRx, a website that helps people find discounts and rebates on prescription medications, Medicare Part D insurance companies in 2024 cover 54% of all drugs approved by the Food and Drug Administration, compared to 75% in 2010.

During that same time, the percentage of drugs that Medicare drug coverage plans put restrictions on rose to 50% from 25% of all FDA-approved drugs.

GoodRx notes that the statistics are likely worse for group health plans because they are not subject to the same regulations as Medicare plans are.

This trend makes it vitally important that your employees review formularies of covered medications during open enrollment to ensure they choose a health plan that covers drugs they may need for a chronic condition, or which they need to take regularly for other issues.

It’s also important that they understand how much of a certain drug their health plan will cover and what their estimated out-of-pocket costs will be, so that they can budget accordingly.

Formularies explained

The list of drugs that an insurance plan will cover or pay for is called a formulary. Pharmacy benefit managers, which health insurers contract with to manage drug costs, set these formularies, which determine how much a patient will pay out of pocket for their medication.

PBMs regularly add and remove drugs on their formularies based on their effectiveness, price, demand and available alternatives.

These formularies also dictate copays and coinsurance — the patient’s out-of-pocket costs for each drug.

Getting squeezed

The title of the GoodRx report — “The Big Pinch” — reflects the trend of the past 14 years that’s resulted in patients being pinched between high drug costs and their health plans’ limiting coverage through prior authorizations.

First, copays and coinsurance have been increasing since 2010, usually after PBMs move certain drugs from one tier to another, according to the report. As well, more American workers are now in high-deductible health plans, which require more out-of-pocket layouts in exchange for lower premiums.

Also, a growing number of people have a separate deductible applied to prescription medications. This is referred to as a pharmacy deductible. These deductibles can be anywhere from $134 to $465 per month.

On top of it all, pharmaceuticals are getting more expensive.

Meanwhile, prior authorization rules imposed by PBMs and health plans require doctors to not only prescribe, but also justify why they are prescribing a medication, which may cause delays and make it more difficult for patients to receive drugs. In some cases, prior authorization may dissuade people from filling their prescriptions.

Eight in 10 doctors surveyed by the American Medical Association said that prior authorization leads to patients abandoning treatment.

Also, if patients encounter too many problems trying to fill a prescription, they may opt for paying out of pocket, which means absorbing the exorbitant cash price of the drug.

Help your staff pick the right plan

For workers who are healthy and young, these increasing restrictions may not have a great effect on their pocketbooks and quality of life. But for individuals with chronic conditions and other health problems that require certain medications, it’s vitally important that they are diligent and do their homework during open enrollment to ensure continued access to the medications they need.

If they want to stay in their existing plan, they need to review the formulary every open enrollment to make sure their drug is still covered. And if they are looking to change plans, they’ll need to do the same homework.

If an employee is struggling to pay for their medications, they may need to scale up to a more generous health plan, but it will likely cost them more in higher premiums in exchange for a lower deductible and/or lower copays and coinsurance. That’s the trade-off.

The worst thing is for someone to choose a plan that doesn’t cover medications they’ve come to rely on, or if their plan drops their medication.

"Accounting
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Study Predicts 8% Group Health Plan Cost Increase for 2025

by Inoventive Solutions
August 6, 2024

A new study predicts that group health insurance costs will jump 8% in 2025, on par with what American employers have experienced this year and in 2023.

The higher rates reflect the costs borne by health insurers, which are seeing more claims for care that was postponed during the COVID-19 pandemic and a steady rise in the cost of pharmaceuticals as more innovative and effective drugs come to market, according to the study by PricewaterhouseCoopers.

Additionally, health plans have seen a surge in demand and utilization for behavioral health services, which has been hampered by a limited supply of in-network mental health professionals, who are also demanding higher reimbursement rates.

And while drug costs are rising, some of the medications may actually reduce future health care costs for those taking them. There are also new biosimilar drugs coming to market that cost a fraction of the originals.

Cost drivers

Thanks to a continuing stream of pharmaceutical breakthroughs that are saving patients’ lives and/or improving their quality of life, insurers have to make coverage decisions. Many of the new drugs are costly, but they may also reduce overall health care costs in the long run as they may reduce the need for expensive intervention and emergency treatments.

Two classes of drugs that are on health insurers’ radar in 2024 and 2025 are:

  • GLP-1 agonists (annual cost: about $11,000).Various of this category of drugs treat type 2 diabetes, and can assist with chronic weight management and may reduce secondary cardiovascular events.
    Most health plans offer coverage of GLP-1 agonists for type 2 diabetes. However, health plans won’t cover them solely for weight management, which is not considered an essential health benefit under the Affordable Care Act.
  • Central nervous system drugs (annual cost: about $22,000). This includes various drugs treating conditions such as Alzheimer’s, Parkinson’s, multiple sclerosis and schizophrenia.
    While these medications may make it difficult for health plans to manage their costs, the report notes that despite the initial cost, health plans may see reduced medical costs as patient health improves.

Mental health services are also driving costs, and they were listed among the top three inflators of drug costs by health plans surveyed for the PwC report.

While the per member per month outlays for mental health services have historically been too low to be considered a cost driver of overall medical costs, spending on mental health has jumped 50% since the pandemic. As a result, behavioral health services are accounting for a greater portion of health plan spending.

The main factors affecting costs are a significant supply and demand imbalance for behavioral health services. Health plans are competing with each other to sign on mental health providers from a pool that is not enough to satisfy demand.

Counterbalancing costs

There are three trends that could counterbalance some cost increases.

Biosimilars. — Biosimilars are biological products that are “highly similar” to and have “no clinically meaningful differences” from an existing Food and Drug Administration-approved reference product. One of the most recent drugs that has seen a flood of competing biosimilars hit the market is Humira (adalimumab), a medication that reduces the signs and symptoms of moderate to severe rheumatoid arthritis.

One report estimates that the savings generated by biosimilars in 2022 was $9.4 billion in the United States. Another analysis performed in early 2023 projects total savings from biosimilars to range from $125 billion to $237 billion between 2023 and 2027.

Health plans are increasingly focused on reducing wasteful spending, which is forcing them to look at:

Exploring new pharmacy benefit manager models. — This is in light of continuing reports of the country’s largest PBMs actually increasing the cost of medications for payers (health plans, self-insured employers and insureds).

Integrating medical and pharmacy benefits. — An example of this is a health plan pharmacy team identifying when members haven’t picked up prescriptions, aren’t taking medications as prescribed or not refilling prescriptions on time.

Connected benefits allow for real-time medical, behavioral health and pharmacy data analysis to help maximize management of chronic conditions, close care gaps and monitor prescription use and potential interaction.

A study of its own clients by health insurer Health Care Service Corporation found that large employer groups with integrated pharmacy and medical benefits saved an average of $516 per member per year in medical costs over a three-year period.

The takeaway

As health insurance costs continue to rise, we can work with you to find health plans that will fit your and your employees’ budgets and help you look for actions to take that could have a positive effect on your rates.

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