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Organizations in Asia are Saying. How do I deal with another renewal increase? Rate shopping every year doesn't have the same effect as it used to.".
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1. Healthcare Management Cost containment amidst the current economic downturn
2. If you feel that your costs are rising, youre not in control of the expenditure and it feels like a tidal wave well, youre not alone. Some of our clients and key organizations are saying exactly the same thing.If you feel that your costs are rising, youre not in control of the expenditure and it feels like a tidal wave well, youre not alone. Some of our clients and key organizations are saying exactly the same thing.
3. The Downturn Presents An Opportunity To Review Your Healthcare Strategy During a downturn, employees understand the need to take bitter medicine. Is this a window of opportunity to implement some tough decisions to ensure the financial sustainability of your health care plans especially as healthcare cost will continue to rise?
Given Asias continuing competition for skilled talent and the fact that a downturn will not last forever, its important to find creative ways to contain costs while still meeting employee needs. Cost containment is a long term journey that transcend across economic cycles.
Emerging best practices regionally on cost containment keeping in mind the long-term journey to financial sustainability is co-responsibility for smart healthcare spend and addressing underlying healthcare risk There is always light at the end of the tunnel. A crisis presents an opportunity for companies to take a good long hard look at their balance sheet and philosophies and make the necessary changes to sustain their lifeline. And as such, Employees understand the need to share or co-share the burden of funding as long as they get to keep their jobs for example. Some of our clients are embarking on tough decisions such as creating panel hospitals, imposing co-payments, and even looking at some flexibility and choice around cost sharing mechanisms with their employees. All with a view of balancing the healthcare strategy which over the years have been growing double digits.There is always light at the end of the tunnel. A crisis presents an opportunity for companies to take a good long hard look at their balance sheet and philosophies and make the necessary changes to sustain their lifeline. And as such, Employees understand the need to share or co-share the burden of funding as long as they get to keep their jobs for example. Some of our clients are embarking on tough decisions such as creating panel hospitals, imposing co-payments, and even looking at some flexibility and choice around cost sharing mechanisms with their employees. All with a view of balancing the healthcare strategy which over the years have been growing double digits.
4.
Employers who act now, can curb the rate of growth and implement cost containment tactics before it becomes too late. By proactively developing a cost containment strategy, you will have a much easier time making tough decisions to ensure the financial sustainability of your plan.
Before jumping into solutions, lets talk about why we are here in the first place and the types of cost and business pressures our clients are facing.
Employers who act now, can curb the rate of growth and implement cost containment tactics before it becomes too late. By proactively developing a cost containment strategy, you will have a much easier time making tough decisions to ensure the financial sustainability of your plan.
Before jumping into solutions, lets talk about why we are here in the first place and the types of cost and business pressures our clients are facing.
5. Medical plan sponsors are interested in cost containment strategies because they have experienced, and will continue to experience, increasing premium costs Historically, Asia has been immune from organizations coming to a standstill over benefits costs. This is because the costs have been relatively low as a percentage of payroll. However, it is becoming a larger problem as the costs of insured and self-insured health benefits have been rising dramatically higher than general inflation.
Prior to the recession with many companies experiencing 15% increases a year, we were forecasting a doubling of employer health care expenses in less than five years. We actually now expect the time period required for a doubling of costs to be compressed. Its getting worse because the fundamentals have changed quite drastically in the last five years.
Historically, Asia has been immune from organizations coming to a standstill over benefits costs. This is because the costs have been relatively low as a percentage of payroll. However, it is becoming a larger problem as the costs of insured and self-insured health benefits have been rising dramatically higher than general inflation.
Prior to the recession with many companies experiencing 15% increases a year, we were forecasting a doubling of employer health care expenses in less than five years. We actually now expect the time period required for a doubling of costs to be compressed. Its getting worse because the fundamentals have changed quite drastically in the last five years.
6. Some health issues around the world are different. So, many health care issues are different in different parts of the world. So, many health care issues are different in different parts of the world.
7. Some health issues around the world are similar. And yet they are not too different. In a sophisticated market, there are pressures in these areas, the delivery system, uneven balance between private and public healthcare with most Asian governments bearing the brunt on subsidy, increase of litigation and worryingly, the increase of chronic illnesses in a young employee population. Despite Asia being much younger compared to its Western counterparts, were not exactly healthier. As you can see the health factors are also playing a role in increasing our costs. With technology improving and consumer awareness increasing, there is also rising demand on these sophisticated treatment types, hospitals are investing tremendous amounts of money in getting these technological advances in which unfortunately also drives up the cost.And yet they are not too different. In a sophisticated market, there are pressures in these areas, the delivery system, uneven balance between private and public healthcare with most Asian governments bearing the brunt on subsidy, increase of litigation and worryingly, the increase of chronic illnesses in a young employee population. Despite Asia being much younger compared to its Western counterparts, were not exactly healthier. As you can see the health factors are also playing a role in increasing our costs. With technology improving and consumer awareness increasing, there is also rising demand on these sophisticated treatment types, hospitals are investing tremendous amounts of money in getting these technological advances in which unfortunately also drives up the cost.
8. Malaysia health context - business issues and challenges SOURCE: health risk- Axco report sept 2007
Healthcare market: Ppt from Joan
Cost of Health: WHO, Aon, AxcoSOURCE: health risk- Axco report sept 2007
Healthcare market: Ppt from Joan
Cost of Health: WHO, Aon, Axco
9. Same goes over the causeway: Our closest neighbour and one that we often do comparison, as their healthcare delivery system is quite advanced, is also no exception where over the last year the government has been priming is to be prepared for rising private sector medical expenditures. They have removed subsidies for foreign professional workers, privatised more hospitals and embarking on means testing making the cost of healthcare a costly affair. Our closest neighbour and one that we often do comparison, as their healthcare delivery system is quite advanced, is also no exception where over the last year the government has been priming is to be prepared for rising private sector medical expenditures. They have removed subsidies for foreign professional workers, privatised more hospitals and embarking on means testing making the cost of healthcare a costly affair.
10. Mounting cost pressures In 2009, employer sponsors of health plans will face 3 factors which will force employers to take a harder look at their benefit plan.
1st, they will continue to be subject to the cost drivers that have emerged over the last five years namely: increase in chronic disease like diabetes and heart disease in part due to changing lifestyle and aging; advancing medical technologies like new diagnostic scans that come at a large price; public health care reform like that seen in Singapore around hospital subsidy mean testing which shifts cost to the private sector and rising employee expectations, particularly in emerging economies where higher income levels are resulting in employees looking for the latest and greatest in health care.
2nd, employers will face some additional pressures that become particularly prevalent in an economic downturn. Health benefit costs are likely to rise in an economic downturn primarily because of the defensive actions taken by employees and insurers. The change in how employees and their dependents use benefits is driven largely by fear and anxiety.Stress and lay-offs can lead to increased use of services. Employees who are laid off, fear being laid off or expect that their employer might reduce benefit levels, will quite rationally increase their use of health care services before these things happen. Discretionary services such as prescription refills, preventive care exams, elective surgeries, screenings and lab tests are examples of services that can be arranged before coverage terminates or changes.
The 2nd source of unanticipated cost increase comes from the insurance companies. These organizations have been adversely affected by their own investment portfolio losses, a hardening Property/Casualty market and/or the inability to increase rates to compensate for lost investment income. How will the insurers react? They may try to increase their premium rates more than initially anticipated.
Another unanticipated cost increase can come from the provider community (e.g., physicians, hospitals, medical and pharmaceutical suppliers). They also may have suffered endowment investment losses and cash flow strains along with a decline in demand from newly uninsured patients and from employed patients who have increased cost-sharing provisions. The combination of all these factors could lead hospitals and physicians to try to increase demand and/or charge more, especially for those with insurance.
3rd, HR will be given firm direction to manage costs. We are already seeing this from clients faced with Tightening of Expenditures, Increased budgeting pressures, Increased need to demonstrate ROI
All of these point to the urgent need for creative cost mgmt.In 2009, employer sponsors of health plans will face 3 factors which will force employers to take a harder look at their benefit plan.
1st, they will continue to be subject to the cost drivers that have emerged over the last five years namely: increase in chronic disease like diabetes and heart disease in part due to changing lifestyle and aging; advancing medical technologies like new diagnostic scans that come at a large price; public health care reform like that seen in Singapore around hospital subsidy mean testing which shifts cost to the private sector and rising employee expectations, particularly in emerging economies where higher income levels are resulting in employees looking for the latest and greatest in health care.
2nd, employers will face some additional pressures that become particularly prevalent in an economic downturn. Health benefit costs are likely to rise in an economic downturn primarily because of the defensive actions taken by employees and insurers. The change in how employees and their dependents use benefits is driven largely by fear and anxiety.Stress and lay-offs can lead to increased use of services. Employees who are laid off, fear being laid off or expect that their employer might reduce benefit levels, will quite rationally increase their use of health care services before these things happen. Discretionary services such as prescription refills, preventive care exams, elective surgeries, screenings and lab tests are examples of services that can be arranged before coverage terminates or changes.
The 2nd source of unanticipated cost increase comes from the insurance companies. These organizations have been adversely affected by their own investment portfolio losses, a hardening Property/Casualty market and/or the inability to increase rates to compensate for lost investment income. How will the insurers react? They may try to increase their premium rates more than initially anticipated.
Another unanticipated cost increase can come from the provider community (e.g., physicians, hospitals, medical and pharmaceutical suppliers). They also may have suffered endowment investment losses and cash flow strains along with a decline in demand from newly uninsured patients and from employed patients who have increased cost-sharing provisions. The combination of all these factors could lead hospitals and physicians to try to increase demand and/or charge more, especially for those with insurance.
3rd, HR will be given firm direction to manage costs. We are already seeing this from clients faced with Tightening of Expenditures, Increased budgeting pressures, Increased need to demonstrate ROI
All of these point to the urgent need for creative cost mgmt.
11. Healthcare The shape of things to come. We will start with the bad news. Yes this may make you think of the West, but for those of you who operate in emerging markets like India, Philippines, Mexico and many parts of Africa, this picture may really hit close to home.
New wealth and new sedentary jobs mean many are adopting western lifestyles little exercise, fatty foods, smoking and alcohol. We are starting to see the disease profiles of 40 year olds in many 25 year olds in both developed and emerging economies.
We will start with the bad news. Yes this may make you think of the West, but for those of you who operate in emerging markets like India, Philippines, Mexico and many parts of Africa, this picture may really hit close to home.
New wealth and new sedentary jobs mean many are adopting western lifestyles little exercise, fatty foods, smoking and alcohol. We are starting to see the disease profiles of 40 year olds in many 25 year olds in both developed and emerging economies.
12. Lifestyle and chronic disease Lifestyle will impact disease patterns You can see here how high drinking, smoking and obesity rates are in places like the US and the UK. This has created a high rate of heart disease, diabetes, cancers and other chronic diseases which come with heavy price tags given that treatment is ongoing not to mention lower quality of life.
Rates in emerging markets are catching up quickly, and when it comes to smoking, many Asian countries are in worse shape than the west, especially when it comes to men. One estimate is that 50% of Indian BPO workers smoke, and female smoking rates are also starting to catch up to the male rates.
You can see here how high drinking, smoking and obesity rates are in places like the US and the UK. This has created a high rate of heart disease, diabetes, cancers and other chronic diseases which come with heavy price tags given that treatment is ongoing not to mention lower quality of life.
Rates in emerging markets are catching up quickly, and when it comes to smoking, many Asian countries are in worse shape than the west, especially when it comes to men. One estimate is that 50% of Indian BPO workers smoke, and female smoking rates are also starting to catch up to the male rates.
13. Lifestyle and chronic disease Lifestyle will impact disease patterns This will of course drive up rates of chronic disease like diabetes. Some of this has to do with reporting but we are already seeing fairly high diabetes rates in the developed parts of Asia. Asians are also afflicted at a younger age than their European counterparts, mostly appearing between 45 to 64, compared to over 65 in Europe and North America. (Source CBC News). A recent study by World Health Organization estimated that 80% of heart disease, stroke and Type 2 diabetes, and 40% of cancer in Europe, can be avoided if common lifestyle risk factors were eliminated. In Malaysia, 98% of the 1.2 million diabetics in Malaysia are diagnosed with Type 2 diabetes. By 2020, 25% of the Malaysian population will be plagued by this killer disease. (Source: Malaysian Diabetes Association). This will of course drive up rates of chronic disease like diabetes. Some of this has to do with reporting but we are already seeing fairly high diabetes rates in the developed parts of Asia. Asians are also afflicted at a younger age than their European counterparts, mostly appearing between 45 to 64, compared to over 65 in Europe and North America. (Source CBC News). A recent study by World Health Organization estimated that 80% of heart disease, stroke and Type 2 diabetes, and 40% of cancer in Europe, can be avoided if common lifestyle risk factors were eliminated. In Malaysia, 98% of the 1.2 million diabetics in Malaysia are diagnosed with Type 2 diabetes. By 2020, 25% of the Malaysian population will be plagued by this killer disease. (Source: Malaysian Diabetes Association).
14. Demographics Employees in Asia are generally younger. The problem will only get worse as the population ages.
This slide shows the distribution of the population in Asia by age and gender. As you can see, most of the population is at the bottom in the under age 40 categories. This will shift as the population ages over the next decades.
What is really of note for many parts of Asia however is the fact that infant mortality is dropping while longevity is increasing this is a positive phenomenon but will place even greater pressure on health care systems.
You may not think you need to do anything today because your population is relatively healthy. However, you should take advantage of this situation by instilling healthy habits in your population today. India is the perfect example of where this is really important. The problem will only get worse as the population ages.
This slide shows the distribution of the population in Asia by age and gender. As you can see, most of the population is at the bottom in the under age 40 categories. This will shift as the population ages over the next decades.
What is really of note for many parts of Asia however is the fact that infant mortality is dropping while longevity is increasing this is a positive phenomenon but will place even greater pressure on health care systems.
You may not think you need to do anything today because your population is relatively healthy. However, you should take advantage of this situation by instilling healthy habits in your population today. India is the perfect example of where this is really important.
15. Preventing and managing claims is key to long term cost management But its not all doom and gloom. The key to managing premium costs for things like hospitalization is to manage employee claims, which is the primary driver of the costs of employee benefit programs.
This is because as insurance markets become more mature, insurers set premiums as equivalent to claims plus administrative expenses. The expense piece is very small so managing claims is what is important in the long term. Part of our role as an industry leader is to help clients and the market understand that shopping around for a new insurer every year is one solution, but is not a long term solution. Pushing through all claims including those that are questionable is likely a practice that is on its way out. This is why we need to have a multi-pronged approach to cost containment, with employee personal responsibility for smart healthcare spend at the heart of it.
But its not all doom and gloom. The key to managing premium costs for things like hospitalization is to manage employee claims, which is the primary driver of the costs of employee benefit programs.
This is because as insurance markets become more mature, insurers set premiums as equivalent to claims plus administrative expenses. The expense piece is very small so managing claims is what is important in the long term. Part of our role as an industry leader is to help clients and the market understand that shopping around for a new insurer every year is one solution, but is not a long term solution. Pushing through all claims including those that are questionable is likely a practice that is on its way out. This is why we need to have a multi-pronged approach to cost containment, with employee personal responsibility for smart healthcare spend at the heart of it.
16. Encourage healthy behaviors and personal responsibility for smart healthcare spend by giving the employees: For many markets in Asia, personal responsibility for smart healthcare spend will be the key to managing costs into the future. This involves giving employees the incentive, knowledge and tools to help them manage the costs.
A good example of a consumerism incentive that exists in the Hong Kong market is to provide a daily cash allowance to patients that stay in a government instead of private hospital. I would argue that making employees pay an affordable co-insurance level say 10% would promote even smarter decisions.
Encouraging specific behaviour and utilization through differentiation in reimbursement of Gov vs. private, panel vs non-panel consultationsread all the different ways for your market..see above
MCs: More flex dollars to those with higher or perfect attendance
Knowledge could involve giving employees information about how to manage diabetes for example, or around how different hospitals set prices or the risk of Caesareans
Example: Reimburse 90% for maternity education, 70% dont ? move away from Caesareans
Tools could include scripts for talking to doctors about the different treatments & costs
Consumerism tactics need to be designed with culture in mind, because what drives behaviour in one market is different from another.
For many markets in Asia, personal responsibility for smart healthcare spend will be the key to managing costs into the future. This involves giving employees the incentive, knowledge and tools to help them manage the costs.
A good example of a consumerism incentive that exists in the Hong Kong market is to provide a daily cash allowance to patients that stay in a government instead of private hospital. I would argue that making employees pay an affordable co-insurance level say 10% would promote even smarter decisions.
Encouraging specific behaviour and utilization through differentiation in reimbursement of Gov vs. private, panel vs non-panel consultationsread all the different ways for your market..see above
MCs: More flex dollars to those with higher or perfect attendance
Knowledge could involve giving employees information about how to manage diabetes for example, or around how different hospitals set prices or the risk of Caesareans
Example: Reimburse 90% for maternity education, 70% dont ? move away from Caesareans
Tools could include scripts for talking to doctors about the different treatments & costs
Consumerism tactics need to be designed with culture in mind, because what drives behaviour in one market is different from another.
17. Combating Rising Employee Health Care Costs Solutions typically fall into 4 categories A cost containment strategy combines measures from each category, possibly implemented over time, that best suit the benefits philosophy or your organization, the benefits needs of your employees and your assessment of your plan and claims to understand the primary cost drivers. An assessment of the impact and ease of implementation is needed to determine the final candidates for consideration.
Benefit plan design is the most established category of cost containment
Delivery effectiveness involves eliminating the wastage that exists in a benefit plan, for example, dollars spent on exorbitant hospital fees or high insurance premiums.
Health management is a long term approach to cost containment and this involves programs to manage prevalent health risks that exist within an employee population and long-term monitoring and evaluation and requires the use of specialty vendors A cost containment strategy combines measures from each category, possibly implemented over time, that best suit the benefits philosophy or your organization, the benefits needs of your employees and your assessment of your plan and claims to understand the primary cost drivers. An assessment of the impact and ease of implementation is needed to determine the final candidates for consideration.
Benefit plan design is the most established category of cost containment
Delivery effectiveness involves eliminating the wastage that exists in a benefit plan, for example, dollars spent on exorbitant hospital fees or high insurance premiums.
Health management is a long term approach to cost containment and this involves programs to manage prevalent health risks that exist within an employee population and long-term monitoring and evaluation and requires the use of specialty vendors
18. Cost containment - possible solutions Cost Shifting Versus Cost Management Cost Shifting
Involves reducing the portion of the expense paid for by the employer and increases to portion paid for by the employee
Cost shifting to employees typically generated by plan design changes Cost Management
Involves managing both the employer and the employee portion of the cost through interventions that dont negatively affect health outcomes
Cost management typically generated by delivery, financing and health risk management interventions
Elimination of wastage
Reduction of vendor costs
Reduction to health risks
Often invisible to employees
19. Cost containment - possible solutions
There is no shortage of possible ways to contain benefit plan costs. We can help you with step 2 - prioritize short medium and long term initiatives to contain costs. Possible initiatives fit into the following categories.
READ SLIDEThere is no shortage of possible ways to contain benefit plan costs. We can help you with step 2 - prioritize short medium and long term initiatives to contain costs. Possible initiatives fit into the following categories.
READ SLIDE
20. Benefit Plan Design Emerging Best Practices from Around the Region Lets look at some best practices around the region, starting with benefit plan design
In India, many employers are rethinking their traditional approach of providing medical coverage to parents. They are looking at requiring employee premium contributions for this coverage. One firm we are working with is introducing partial premium sharing of parents medical as part of the optional benefits in a Flex plan with full shifting of the premium payment over several years
In the Philippines, Health Maintenance Organizations (HMOs) cover 100% of the expenses up to the maximum benefit limits. Some employers are now considering to impose a deductible to discourage unnecessary hospital confinements.
In Hong Kong and Singapore where quality of public health provision is high, some plans provide incentives (e.g., daily cash allowance or no co-insurance) to encourage use of Government hospitals, such incentives could be expanded or better communicated.Lets look at some best practices around the region, starting with benefit plan design
In India, many employers are rethinking their traditional approach of providing medical coverage to parents. They are looking at requiring employee premium contributions for this coverage. One firm we are working with is introducing partial premium sharing of parents medical as part of the optional benefits in a Flex plan with full shifting of the premium payment over several years
In the Philippines, Health Maintenance Organizations (HMOs) cover 100% of the expenses up to the maximum benefit limits. Some employers are now considering to impose a deductible to discourage unnecessary hospital confinements.
In Hong Kong and Singapore where quality of public health provision is high, some plans provide incentives (e.g., daily cash allowance or no co-insurance) to encourage use of Government hospitals, such incentives could be expanded or better communicated.
21. Benefit Plan Design Top 5 Suggestions Benchmark your plans to ensure that they are not more generous than they need to be
Consider more limits or coinsurance for inpatient & outpatient expenses
Consider tiered coinsurance
If you are on Flex, are you comfortable using the cost shifting mechanism
Consider defined contribution approaches (i.e., Medical Saving Accounts)
Remove coverage for luxury items
Here are some suggestions to consider:
Benchmark your clients plans to ensure that they are not more generous than they need to be
Dependent cover on a voluntary basis and funded by employees is not uncommon. HRs see it as leveraging on group rates to allow employees to stretch their protection dollars. Downside of group policies is not portable though cheaper than individual insurance rates.
Limits/Co-insurance for inpatient/outpatient: These are the easiest to design & implement and tend to see results quickly. This includes tightening the screw on benefits limits, allowable claim types, referral letters for SP, # visits per member per year, incorporating annual or per consultation limits, deductibles
Example: As Chinese herbalist and bonesetter benefits are easily subject to abuse, it would be beneficial to design a plan with a 5 visit limitation for these benefits. Then, negotiate and contract with service providers to offer a discount rate for visits that exceed the limit.
Example Mercer helped to save almost 50% reduction in specialists costs in top claimants, 10% in overall specialists costs
From Unlimited Specialist benefit to S$1000 per employee per year + $15 co-payment per visit
Manage chronically sick via a 3-year transition program with tier co-sharing as below:
1st transition year: unlimited
2nd year: 100% reimbursement up to $1000, 30% co-payment for claims in excess of $1000
3rd transition year: 100% reimbursement up to $1000, 50% co-payment for claims in excess of $1000
These chronically sick employees are given a letter from Seagate to inform them about their benefit in these 3 years. At the same time, employees are encouraged to consider step-down care and encourage them to stay healthy, all these to prepare them for the annual limit in 4th year and onwards
Example - Immediate 25% reduction in claims in 1st year; After Mercer drilled deeply into the source of the high cost claims ? By tweaking plan design GHS/GMM, achieved 25% reduction in claims in 1st year Specialist benefit was changed from $500 every 3 months to $1000 per year
Tiered coinsurance which would involve a higher reimbursement level say for tried tested and true therapies versus new less proven therapies - refer to prior page incentives examples
Example: Tiered claims reimbursement system (such as the first 10 claims visits reimbursable at 100%, the rest of claims will be reimbursable at 80% etc to increase the members responsibility in utilizing the benefit appropriately).
FLEX: For those employers who have implemented flex, this may be the time to use the cost shifting mechanism to move some of the cost increases to employees by increasing the benefits price tags faster than the flex credits, inflationary cost increases can be shifted to employees
Example: Tech firm transferred cost increase over 2 years by increasing benefits price tag by half the first year, then the remainder second year
Example: Add portability as an item in your FSA to help employees with personal insurance they can take with them but Broker negotiates discounted pricing: portable medical or other voluntary personal insurances
MSA: Consider defined contribution approaches such as a Medical Savings Account (see ABN example) only in flex programs and tend to be more prevalent in financial services and technology companies in SG. Not prevalent in other Asian countries. Medical Spending Account structure allows flexibility and empowers employees to manage own medical outpatient budget.
Introduction of a Medical Wellness Spending Account and Wellness Dollars in 2001 Amount in Spending Account determined through average spend per employee/family Wellness Dollars operates like Flexi Dollars in a flexi benefit scheme A % of unused Spending Account gets converted to Wellness Dollars (insurance, dental, optical, TCM, immunization, maternity, dependent coverage)
Employees to take charge of their health & medical spend
2) To reward employees for proper management of Spending A/C
3) Employer to partner Employees in maintaining their health
4) To deliver a win-win arrangement
Bank saved $1M over 4 years
Remove coverage for luxury items make sure plans include a disincentive for luxury hospital rooms for example
In-house clinic only refers to Gov hospitals
Here are some suggestions to consider:
Benchmark your clients plans to ensure that they are not more generous than they need to be
Dependent cover on a voluntary basis and funded by employees is not uncommon. HRs see it as leveraging on group rates to allow employees to stretch their protection dollars. Downside of group policies is not portable though cheaper than individual insurance rates.
Limits/Co-insurance for inpatient/outpatient: These are the easiest to design & implement and tend to see results quickly. This includes tightening the screw on benefits limits, allowable claim types, referral letters for SP, # visits per member per year, incorporating annual or per consultation limits, deductibles
Example: As Chinese herbalist and bonesetter benefits are easily subject to abuse, it would be beneficial to design a plan with a 5 visit limitation for these benefits. Then, negotiate and contract with service providers to offer a discount rate for visits that exceed the limit.
Example Mercer helped to save almost 50% reduction in specialists costs in top claimants, 10% in overall specialists costs
From Unlimited Specialist benefit to S$1000 per employee per year + $15 co-payment per visit
Manage chronically sick via a 3-year transition program with tier co-sharing as below:
1st transition year: unlimited
2nd year: 100% reimbursement up to $1000, 30% co-payment for claims in excess of $1000
3rd transition year: 100% reimbursement up to $1000, 50% co-payment for claims in excess of $1000
These chronically sick employees are given a letter from Seagate to inform them about their benefit in these 3 years. At the same time, employees are encouraged to consider step-down care and encourage them to stay healthy, all these to prepare them for the annual limit in 4th year and onwards
Example - Immediate 25% reduction in claims in 1st year; After Mercer drilled deeply into the source of the high cost claims ? By tweaking plan design GHS/GMM, achieved 25% reduction in claims in 1st year Specialist benefit was changed from $500 every 3 months to $1000 per year
Tiered coinsurance which would involve a higher reimbursement level say for tried tested and true therapies versus new less proven therapies - refer to prior page incentives examples
Example: Tiered claims reimbursement system (such as the first 10 claims visits reimbursable at 100%, the rest of claims will be reimbursable at 80% etc to increase the members responsibility in utilizing the benefit appropriately).
FLEX: For those employers who have implemented flex, this may be the time to use the cost shifting mechanism to move some of the cost increases to employees by increasing the benefits price tags faster than the flex credits, inflationary cost increases can be shifted to employees
Example: Tech firm transferred cost increase over 2 years by increasing benefits price tag by half the first year, then the remainder second year
Example: Add portability as an item in your FSA to help employees with personal insurance they can take with them but Broker negotiates discounted pricing: portable medical or other voluntary personal insurances
MSA: Consider defined contribution approaches such as a Medical Savings Account (see ABN example) only in flex programs and tend to be more prevalent in financial services and technology companies in SG. Not prevalent in other Asian countries. Medical Spending Account structure allows flexibility and empowers employees to manage own medical outpatient budget.
Introduction of a Medical Wellness Spending Account and Wellness Dollars in 2001Amount in Spending Account determined through average spend per employee/familyWellness Dollars operates like Flexi Dollars in a flexi benefit schemeA % of unused Spending Account gets converted to Wellness Dollars (insurance, dental, optical, TCM, immunization, maternity, dependent coverage)
Employees to take charge of their health & medical spend
2) To reward employees for proper management of Spending A/C
3) Employer to partner Employees in maintaining their health
4) To deliver a win-win arrangement
Bank saved $1M over 4 years
Remove coverage for luxury items make sure plans include a disincentive for luxury hospital rooms for example
In-house clinic only refers to Gov hospitals
22. Delivery & Financing Effectiveness Emerging Best Practices from Around the Region Lets look at some best practices in delivery effectiveness which again is all about eliminating unnecessary costs without compromising the quality of the health consequences or outcomes.
In Thailand, many claims are first submitted to employer sponsored group plans even though other programs should and/or could act as the first payer. It is important to educate employees and payers around where claims should be sent to social security, workmens compensation, private insurance and/or motor vehicle insurance first.
In Hong Kong, many insurers provide help telephone lines with nursing professionals who can advise employees on whether a quoted hospital price is reasonable and what questions to ask the treating physician.
In Malaysia, many employers are turning to case management niche providers to question hospital and physician billing practices which may include some fraudulent invoicing (since employees dont see such bills) such as 100 vs 10 days of hospitalization.
Regional Asia Pac Single Broker - - consolidating vendors/funding (pooling across region, single broker, single insurerLets look at some best practices in delivery effectiveness which again is all about eliminating unnecessary costs without compromising the quality of the health consequences or outcomes.
In Thailand, many claims are first submitted to employer sponsored group plans even though other programs should and/or could act as the first payer. It is important to educate employees and payers around where claims should be sent to social security, workmens compensation, private insurance and/or motor vehicle insurance first.
In Hong Kong, many insurers provide help telephone lines with nursing professionals who can advise employees on whether a quoted hospital price is reasonable and what questions to ask the treating physician.
In Malaysia, many employers are turning to case management niche providers to question hospital and physician billing practices which may include some fraudulent invoicing (since employees dont see such bills) such as 100 vs 10 days of hospitalization.
Regional Asia Pac Single Broker - - consolidating vendors/funding (pooling across region, single broker, single insurer
23. Delivery & Financing Effectiveness Top 5 Suggestions Audit your claims payers and determine what kind of controls they have in place
Make sure other potential claim payers are identified
Assess whether there is a mechanism for you to share in positive plan financial results
Look into whether your providers will offer rate guarantees
Consolidate vendors for economies of scale Here are some regional approaches we should be suggesting to clients and prospects, depending on their size.
Large employers may wish to complete an audit of their claims payers to determine what kind of controls they have in place. Multinationals have begun to hire independent consultants like Mercer to conduct claims audits especially in emerging markets
Make sure other potential claim payers are identified use the Thailand example on the prior page as a starting point
Assess whether there is a mechanism for the client to share in positive plan financial results - If the client offers coverages around the world or around the region where loss ratios have traditionally been favourable, consider implementing a multinational pool so that the client can share in the financial experience of profitable plans through dividends. Alternatively, see if a favourable local experience refund can be negotiated into the plan at no additional cost or risk so that the client is eligible for a local dividend if the claims experience is favourable.
Look into whether insurers will offer rate guarantees that will shift the risk of future claim cost fluctuations to them
Economies of Scale: Regional Broker. Pooling network. Insurers. Health providers.Here are some regional approaches we should be suggesting to clients and prospects, depending on their size.
Large employers may wish to complete an audit of their claims payers to determine what kind of controls they have in place. Multinationals have begun to hire independent consultants like Mercer to conduct claims audits especially in emerging markets
Make sure other potential claim payers are identified use the Thailand example on the prior page as a starting point
Assess whether there is a mechanism for the client to share in positive plan financial results - If the client offers coverages around the world or around the region where loss ratios have traditionally been favourable, consider implementing a multinational pool so that the client can share in the financial experience of profitable plans through dividends. Alternatively, see if a favourable local experience refund can be negotiated into the plan at no additional cost or risk so that the client is eligible for a local dividend if the claims experience is favourable.
Look into whether insurers will offer rate guarantees that will shift the risk of future claim cost fluctuations to them
Economies of Scale: Regional Broker. Pooling network. Insurers. Health providers.
24. Health Management Emerging Best Practices from Around the Region Health management involves initiatives to keep people as healthy as possible.
In India, many MNCs provide hospitalization coverage for parents. Given the high prevalence of diabetes within this older population, this can be an extremely expensive proposition with parental claims making up about 60% of the total amount paid. Depending on the type of diabetes, most diabetics who manage their illness through lifestyle changes consume very little health care. Progressive employers who invest in diabetes coaching and other similar initiatives could experience a decrease to hospitalization costs.
In China, some pioneering employers within office environments have realized inappropriate workstation setup will cause harm to employee health, leading to neck pain, eyestrain, back pain, carpal tunnel syndrome etc. Professional consulting firms with expertise in ergonomics and work related injury prevention are engaged to provide training sessions, workstation assessments and appropriate adjustment to workstation setup.
In Australia, Mercer has been successful at negotiating with group health risk underwriters to provide a premium discount contingent upon the establishment of a health risk management program. Health management involves initiatives to keep people as healthy as possible.
In India, many MNCs provide hospitalization coverage for parents. Given the high prevalence of diabetes within this older population, this can be an extremely expensive proposition with parental claims making up about 60% of the total amount paid. Depending on the type of diabetes, most diabetics who manage their illness through lifestyle changes consume very little health care. Progressive employers who invest in diabetes coaching and other similar initiatives could experience a decrease to hospitalization costs.
In China, some pioneering employers within office environments have realized inappropriate workstation setup will cause harm to employee health, leading to neck pain, eyestrain, back pain, carpal tunnel syndrome etc. Professional consulting firms with expertise in ergonomics and work related injury prevention are engaged to provide training sessions, workstation assessments and appropriate adjustment to workstation setup.
In Australia, Mercer has been successful at negotiating with group health risk underwriters to provide a premium discount contingent upon the establishment of a health risk management program.
25. Health Management Top 5 Suggestions for Clients to Consider Obtain and use date to start building a health profile for your population
Based on health profile, target health risk management interventions at high risk population and illnesses
Recognize and address stress issues
Wellness initiatives should be based on biometrics of specific employee profile to generate ROI
Start now even though payoff may take several years Here are top 5 health management suggestions for clients to consider:
Obtain and use data to start building a health profile for your population - Do your clients know what the health profile of its employee population is? Do they know what portion of employees have 0 to 2 health risks, 3 to 4 health risks and so on? Do they know how this has changed over time, what portion of the population is the most at risk and what these risks are costing the organization? Knowing the answers to these questions will become fundamental to benefit plan management into the future. Clients should start measurement now so that they have a baseline. Depending on the organization, we recommend a combination of tools to assess this including at a minimum basic biometrics (blood pressure, cholesterol) available from health screening and lifestyle questionnaires that can be delivered through a variety of media. Mercer has specialists who can help in this area.
Based on health profile, clients should target health risk management interventions at high risk population and illnesses, for example cholesterol lowering education programs
Recognize and address stress issues a certain level of stress can improve performance but high levels of stress can create ill health and burnout
If clients are going to invest in wellness, they should do it right instead of through ad hoc measures that dont generate ROI. This means basing initiatives on the biometrics of your specific employee health profile and targeting the high risk population
Start now even though payoff may take several yearsHere are top 5 health management suggestions for clients to consider:
Obtain and use data to start building a health profile for your population - Do your clients know what the health profile of its employee population is? Do they know what portion of employees have 0 to 2 health risks, 3 to 4 health risks and so on? Do they know how this has changed over time, what portion of the population is the most at risk and what these risks are costing the organization? Knowing the answers to these questions will become fundamental to benefit plan management into the future. Clients should start measurement now so that they have a baseline. Depending on the organization, we recommend a combination of tools to assess this including at a minimum basic biometrics (blood pressure, cholesterol) available from health screening and lifestyle questionnaires that can be delivered through a variety of media. Mercer has specialists who can help in this area.
Based on health profile, clients should target health risk management interventions at high risk population and illnesses, for example cholesterol lowering education programs
Recognize and address stress issues a certain level of stress can improve performance but high levels of stress can create ill health and burnout
If clients are going to invest in wellness, they should do it right instead of through ad hoc measures that dont generate ROI. This means basing initiatives on the biometrics of your specific employee health profile and targeting the high risk population
Start now even though payoff may take several years
26. Ways to Differentiate your Healthcare Program Finally, in this environment, many employers may be interested in new low cost benefits that will actually help differentiate them as an employer while managing long term cost. Depending on the size of the organization and level of customization required, these solutions can cost less than 100 USD per employee per year, substantially less in some markets.
READ
If you would like more information about these solutions and availability in your country, please let me know.Finally, in this environment, many employers may be interested in new low cost benefits that will actually help differentiate them as an employer while managing long term cost. Depending on the size of the organization and level of customization required, these solutions can cost less than 100 USD per employee per year, substantially less in some markets.
READ
If you would like more information about these solutions and availability in your country, please let me know.
27. Multiple Tactics Needed to Manage Long Term Costs As mentioned, to achieve short, medium and long term cost containment, we recommend a combination of these three approaches because each has a different return on investment horizon
READ SLIDEAs mentioned, to achieve short, medium and long term cost containment, we recommend a combination of these three approaches because each has a different return on investment horizon
READ SLIDE
28. Cost containment - possible solutions (example)
29. Cost Containment Sample Three Year Approach Year 1
30. Cost Containment Sample Three Year Approach Year 2
31. Cost Containment Sample Three Year Approach Year 3
32. Total Health Management Long Term Panacea Longer term, it will be interesting to see if a total health management approach will emerge to control costs. This would involve a number of activities to create behaviour change so that employees manage their own health and health costs throughout their employment. Such an approach is somewhat aspirational in todays environment but it is important that you are familiar with this term. Longer term, it will be interesting to see if a total health management approach will emerge to control costs. This would involve a number of activities to create behaviour change so that employees manage their own health and health costs throughout their employment. Such an approach is somewhat aspirational in todays environment but it is important that you are familiar with this term.
33. Take-aways for implementing Cost Containment Make sure you have an articulated benefit philosophy and thought about the long term financial sustainability and competitiveness of your program
Communicate with employees regarding the sustainability of the benefit plan and their role in managing costs. Transition over time if possible.
Look at ways to build more personal responsibility into your plans
Tailor your solution for the greatest ROI by drilling down into the primary cost drivers of your claims and addressing the specific health risk of your employees
Adopt a combination of short, medium and long term approaches to health benefit cost containment
So if you do decide that now is the time to take the bitter medicine, here are some take-aways
Make sure you have an articulated benefit philosophy for communication purposes you also need a well articulated benefit philosophy so that employees expectations can be managed. We suggest you start with answering the question why do I offer a benefit plan in the first place? and identifying what you want your benefit plan to accomplish. Most benefit plans have not evolved strategically; most reflect the insurers standard plan tweaked over the years. Building a benefit philosophy provides an opportunity to think strategically about an ideal plan for your organization.
Communicate with employees regarding the sustainability of the benefit plan and their role in managing costs Do your employees know how the costs of the program have changed over the last five years and what this is projected to be over the next five years. You need a story around the role they play in the financial sustainability of the plan.
Look at ways to build more consumerism into your plans Consumerism involves providing employees with the incentive, knowledge and tools to manage their health and health costs.
Get greatest ROI by targeting spend at your employees specific health risk and cost drivers of your claims costs
Adopt short, medium and long term approaches to health benefit cost containment
So if you do decide that now is the time to take the bitter medicine, here are some take-aways
Make sure you have an articulated benefit philosophy for communication purposes you also need a well articulated benefit philosophy so that employees expectations can be managed. We suggest you start with answering the question why do I offer a benefit plan in the first place? and identifying what you want your benefit plan to accomplish. Most benefit plans have not evolved strategically; most reflect the insurers standard plan tweaked over the years. Building a benefit philosophy provides an opportunity to think strategically about an ideal plan for your organization.
Communicate with employees regarding the sustainability of the benefit plan and their role in managing costs Do your employees know how the costs of the program have changed over the last five years and what this is projected to be over the next five years. You need a story around the role they play in the financial sustainability of the plan.
Look at ways to build more consumerism into your plans Consumerism involves providing employees with the incentive, knowledge and tools to manage their health and health costs.
Get greatest ROI by targeting spend at your employees specific health risk and cost drivers of your claims costs
Adopt short, medium and long term approaches to health benefit cost containment
35. Contact Details Joan Collar
Sr Vice President, Business Practice Leader
Health & Benefits
Marsh Insurance Brokers (M) Sdn Bhd
Level 19, West Block, Wisma Selangor Dredging
Jalan Ampang, 50450 Kuala Lumpur
Malaysia
Email: joan.a.collar@marsh.com
Tel: +60 3 2731 3545
Mobile: +60 12 208 5708
