Employee Benefit Consulting Market Sector Overview
Managed care organizations and health insurance companies are highly competitive and continually seeking to gain new plan members and clients while retaining existing business. To stay in front of healthcare cost increases and minimize additional risk, they are continually refining their benefit plan offerings. Their plan designs are also impacted by various regulatory and policy changes at the state and federal level. Employers closely collaborate with employee benefit consultants and brokers for guidance and support in the day-to-day as well as annual and long term planning of healthcare programs for their workers in light of the continual healthcare benefit changes that impact them.
For 2020, average healthcare benefit costs are estimated to increase by 5%; prescription drug prices are anticipated to rise by 3.8%. Benefit plan increases for dental care are expected to go up by 1.5% and vision care costs are forecast to increase 5.6%.
One of the strategic advantages benefit consultants and brokers offer their clients is their oversight and deep experience with multiple employer benefit programs, their respective challenges and the solutions to them. Another advantage is their ability to drill down into the differentiating costs and benefit plan features currently being used by an employer or being considered as new options. Employers and other organizations rely on brokers and employee benefit consultants for analytics, cost comparisons, benefit design enhancements, industry trends and other business intelligence related to their healthcare and other insurance needs.
Insurance And Risk Management Expertise Spanning Medical, Behavioral, Pharmacy, Vision, Dental, Disability
Depending on the size of the company, benefit plan membership ( which includes employees plus their eligible dependents ), budgets and variety of benefit plans they offer, employers depend on their benefit consultants to help them:
- Design and manage healthcare benefits and associated finances to stay within annual corporate budgets
- Assist in managing medical and pharmacy benefit plan vendors like health insurance companies, prescription benefit managers, vision and dental plan companies, disability programs and related services
- Monitor ongoing employee health plan member utilization and associated costs of benefits
- Minimize impact on employees in terms of rising benefit costs while keeping the cost sharing burden on an even keel between the company and its workers
- Assess trends in healthcare and pharmacy benefits, government policy and regulatory changes plus other factors having a financial impact on their benefit costs and plan designs; benefit consultants help them project the impact of change on immediate and future employee benefit plan administration strategies
- Determine suitability of wellness programs and other employee engagement measures designed to improve employee health and lower company benefit costs
- Collaborate on employer RFIs and RFPs aligned with benefit plan vendor selection and subsequent response evaluations resulting in retention of existing vendors or choosing new health, pharmacy, vision or dental plan program vendors
- Advise company on annual open enrollment communications and processes to avoid miscommunication and ensure clarity in regards to increased premiums, copays, coinsurance and other cost sharing changes as well as benefit plan differences from year to year
- Provide guidance on correcting or reinforcing measures to assure employee and dependent healthcare data privacy and other HIPAA measures are effective
6 Escalated Healthcare Risk Management Issues For Employee Benefit Consultants and Employers:
- Catastrophic care costs and potential for stop-loss insurance to fall short of expectations
- Specialty pharmacy drug costs aligned with biotech, orphan drug and other unique but expensive therapies
- Improving competitive benefit programs to attract new talent and retain existing employees while incurring minimal additional budget demands on company finances
- Costly benefit changes required to comply with local, state and federal benefit requirements and regulations which disrupt existing company financial budgets and forecast projections
- Drastic reduction in health insurance benefit provider competition due to consolidation or market exits minimizing benefit plan vendor selection and opportunities to leverage them against each other in rate negotiations
- Developing emergency strategies in the event a company generates less than expected revenue and needs to take more assertive action to reduce costs which may impact employee benefits
Obamacare Moving Forward Into 2020
Transitioning through 2018 into 2019 Obamacare has fully crossed over into the President Trump era. There was significant change underway for employee benefit programs. The Employer Mandate Compliance requirements of the ACA was in full swing. Employers with 100 or more full-time/full-time equivalent employees are required to offer minimum essential coverage to at least 70% of full-time employees and dependents.
Prior to 2017, in 2016 compliance was required at 50 or more full-time/full-time equivalent employees and at a 95% threshold. A compliant offer of affordable minimum value coverage will resolved penalty exposure. Behavioral healthcare is also part of the requirements based on the Mental Health and Parity and Addiction Equity Act. There must be parity between medical/surgical and mental health/substance abuse coverage.
The IRS administers auditing initiatives to verify employer compliance. As 2016 was the first year of composite reporting, some leniency was expected as some errors in the implementation and administration of the ACA measures was expected to carry over from 2015. However, the IRS more closely audited employers to assess "good faith" compliance with the ACA standards. 2018 required thorough alignment with the ACA standards moving forward.
Further challenges have surfaced in 2019 as many leading health plans have exited the lowest premium Obamacare plan market entirely due to administrative and profitability issues. This trend is expected to continue in 2020; some smaller insurers have launched programs in this sector with considerably low cost premiums but with high deductibles and less generous medical and pharmacy benefit plan coverage attributes. Employee benefit consultants support clients with data and guidance to help them stay in compliance with these and other government regulations and policy changes regarding healthcare benefits.
Pre and Post Merger & Acquisition Analysis, Management and Integration
As companies acquire or merge with other companies, benefit consultants and brokers play integral roles during the process. It is crucial employee benefit costs plus other insurance and risk management elements are accounted for in the finances of merger and acquisition transactions. Once deals have been completed, benefit coverage continues and differences between the legacy and new organization benefit designs must be accounted for. Beginning with the alignment of benefits, additional financial analysis and the organization of various member eligibility files, the process typically moves forward in transitioning the acquired organization's benefits programs into the parent host organization healthcare programs.
By migrating the acquired company's benefit plan members into the new host organization, administration can be simplified and cost reduced; benefit plan vendors can more easily encapsulate the organization's present position and move forward with future objectives in reducing benefit expenses and complexity. Benefit plan migrations are challenging and costly; employee benefit consultants, brokers and risk management professionals are active participants in this process as all insured elements of an organization ultimately roll up under its financial structure. Depending on state or federal regulations, the plan migration can become even more complex especially if union, retiree or other healthcare benefit plan programs are involved. This encompasses approved medical providers, member cost sharing terms and pharmacy plans which includes potential changes to brand and generic drug formularies, copays and more program features. Depending upon what is in place for each side of the merger and acquisition stakeholders, dental, vision, rehabilitation, disability and other care and cost features may need to be accounted for in the overall benefit program and risk management profile.
Pharmacy Benefit Management
The larger employee benefit consulting firms like AON, Conduent, Mercer, Segal, Willis Towers Watson also deploy staff members specializing in prescription benefit management as part of their overall healthcare benefits consulting practices covering active employees, dependents, retirees, medical, dental, vision and other programs plus compensation, profit-sharing and other administrative / human resource functions. These staff members are often pharmacists / PharmDs with established experience with clinical outcomes and commercial / cost aspects of prescription medications including brand, generic, oral, injectable, infused, topical formulations as well as strategic tiering of prescription drugs within benefit formulary structures, coinsurance and deductibles to maximize opportunities for economic care. These measures apply to the medical benefit i.e. hospital care and outpatient services drug utilization as well as the retail, mail order and specialty pharmacy prescription drug program participation.
Several of the firms listed above specialize exclusively in pharmacy benefit consulting. These include ArmsRx, KMR Pharmacy Advisors, PBIRx, Pharmacy Benefit Consultants, Pharmacy Outcomes Specialists and Pharmaceutical Strategies Group / PSG. They focus on formulary management, prescription benefit plan design, pharmacy claims auditing, rebate management, medical versus pharmacy benefit coverage, retail/mail order/specialty pharmacy administration and other clinical / financial matters. Through auditing and other means, they assess if the correct copays, dispensing/administrative fees, pricing and other financial or clinical claims adjudication edits are functioning as intended. They can also detect fraud, over-prescribing and other issues. While managing the employer and employer dynamics of prescription drug benefit management, they are also collaborate with employer and managed care organizations to maintain alignment with the U.S. Department of Labor plus other Federal and State agencies that have a leading role in the oversight of employee and retiree benefits regulation.
Third Party Administrators / TPAs
In some instances, TPAs are an employer's company's go-to partner for healthcare and pharmacy benefits support. They not only provide the day-to-day claims administration and processing of healthcare, payroll, workers comp and other financial payment or risk management functions, they may actively support medical, pharmacy and other benefit plan decision making. The larger TPAs have medically savvy staff ( pharmacists, PharmDs, case management nurses and other former clinicians ) and employees from healthcare and pharmacy benefit management organizations.
Depending on the extent of services an employer utilizes their TPA for, they can be well apprised of the finances and budget controls in place and the costs associated with benefit programs. TPAs can augment the efforts of employer benefit departments with standard as well as ad hoc reporting capabilities and other services. In some instances, TPAs provide a wider range of services if they are also benefit brokers. CoreSource, Corvel, Crawford, Esis, Gallagher, Helmsman, Meritain, Sedgwick, UMR and York are some of the largest TPAs in the nation with wide capabilities that work with private and public companies on a regular basis.
Retrospective, Present and Future Clinical and Financial Data
While the concept of "Big Data" and its associated analytics and management has been a comparatively recent trend in many industries, it has been a routine part of the employee benefit consulting and managed care / health insurance realms for decades including early disease management programs, population health outcomes and improvement initiatives such as the development of precision medicine initiatives. Actuarial and risk management professionals have routinely engaged Big Data to assess past, present and future trends. The cloud, accelerated analytic capabilities and advanced programming packages have made it easier / faster for them to execute queries and subsequently base decisions and direction on.
Pharmaceutical, medical device and equipment manufacturers, software companies, managed care organizations and other stakeholders seeking to engage employee benefit consultants with the objective of having them endorse their offering to employers need to offer products and services equipped with a value proposition with a strategic tandem of care and cost attributes. Employee benefit consultants are key influencers in the design, cost and administration of multiple types of benefit plans and are pivotal sources of information employers count on for budgeting, negotiation, modification and management of them. Depending upon the scope and depth of what is involved, clinical or financial considerations may be the predominant deciding factor on how employers, advised by their benefit consultants, determine the best options for their organization and its plan members.
Employee benefit consultants possess a wealth of business intelligence that healthcare product and service marketers can base price, positioning and promotion value proposition and product launch elements on. This includes patient, employer, PBM, health insurance / managed care organization and other considerations. They can enrich market access strategy and be a source of information as competitive, regulatory or other marketplace changes develop.