It's a tough road ahead for many Taft-Hartley plans as they continue to face rising health care costs and prepare for some of the key requirements of the Patient Protection And Affordable Care Act (ACA). In response, many collectively bargained self-funded plans are looking into developing new strategies to contain rising claim costs and maintain coverage and plan flexibility.
Ullico Inc. is the only insurance and investment company owned by a cross section of the labor movement. With over 85 years of experience and expertise serving organized labor, The Union Labor Life Insurance Company (Union Labor Life), a subsidiary of Ullico Inc., has a deep understanding of Taft-Hartley plan demographics and plan structures.
Health care spending consumes a significant portion of the U.S. economy. According to a report published in 2012 by The Kaiser Family Foundation, national health care spending has grown by approximately 2.4% faster than nominal gross domestic product. Over the last 4 decades, health care spending has increased at an average annual rate of 8.2%.
Discounts for medical services through a Preferred Provider Organization (PPO) remain a reliable front-end defense in helping many Taft-Hartley plans control large claim costs. However, relying solely on PPO discounts as the only source of claims management may actually cost a plan more in the long run. Many Taft-Hartley plans negotiate with PPOs to reduce the cost of medical services and supplies.ii Keeping their PPO networks and remaining competitive within their collectively bargained agreements are key to maintaining quality coverage, benefit selections and access to service providers for plan members. However, Taft-Hartley plans face a unique set of circumstances beginning in 2014 with some of the requirements of the ACA.
In a complicated healthcare system comprised of intricate contracts between PPOs and health insurance plans, identifying and managing the main cost drivers are important to the long-term financial viability of plans.
PPO network agreements are not always written to the advantage of the health plan, leaving plenty of opportunities in the claims process for providers to take advantage of loopholes and ambiguous policy provisions. Not enough information may be given to the plan administrator on the true cost of medical services or available discounts, leading to inflated charges. Typical agreements require health plans to pay out re-priced claims within 30 to 60 days of receiving the bill. If not paid within the required timeframe, the plan administrator may risk a reduction or waiver of that PPO discount. As a result, plan administrators are pressured to accept a discount without verifying the eligibility of the claim or the validity of the line item charges.
Our stop loss insurance policyholders can utilize their own cost containment strategies and also access some of the leading professionals in the cost containment industry through Union Labor Life. From helping plans properly negotiate service fees with network providers and third-party administrators, to assisting in identifying potentially fraudulent billing practices and abuses, Union Labor Life works in partnership with policyholders to help them achieve the level of control they need to manage large claim costs, while benefiting from their available PPO discounts.
Monthly hemophilia factor replacement therapy has a retail cost of $618,000 per month. The plan acquired an 83% discount through its PPO, lowering the monthly cost for this specialty drug to $98,817.
Before the plan accepted the discount and paid the claim, the plan administrators consulted Union Labor Life. Our Large Case Management Team stepped in and helped the plan's administrators negotiate with a specialty drug provider to purchase the specialty drug at a 22% lower rate than its PPO's proposed rate. The average monthly cost after negotiation was $76,693.
The plan received an in-patient hospital bill for $198,000. The PPO then provided the plan a 25.6% discount which reduced the plan's liability to $147,000.
Before accepting the discount and paying the claim, Union Labor Life stepped in to review the bill and found $147,000 worth of undocumented charges. After identifying this billing error, the plan was then able to reduce the overall cost of the claim by more than 55%. The plan would have otherwise been required to pay $147,000 had it only relied on its PPO discount arrangement. The final cost after identifying the billing error was $62,000.
These are just a few examples of how we have helped our Stop Loss insurance policyholders manage large medical claim cases. Although a PPO discount arrangement is an important and effective part in building a plan's overall cost containment strategy, it is only the first step in the process of controlling large claim costs. Partnering with a stop loss insurance provider to help a plan identify and manage some of the main cost drivers is also a critical part of its overall cost containment strategy. However, not all stop loss insurance arrangements consider the unique benefit structures of Taft-Hartley plans. Union Labor Life customizes policies for the unique insurance needs of Taft-Hartley plans to help protect them from substantial financial risk. Stop loss policies that are not tailored to the insurance needs of self-funded plans, or those for example, that have terms that can deny claim reimbursements for a member eligible for coverage but not actively at work, may impact their policyholders' fiduciary responsibilities and their long term financial interests.
If your health care plan does not currently have medical stop loss insurance, we encourage you to review the advantages of this coverage as part of maintaining your plan's long-term financial viability while the ACA requirements are still being developed. Union Labor Life's Stop Loss policy incorporates recent ACA regulations, offering broader coverage and greater access to medical claims management resources to help plan sponsors and administrators comply with the new mandates.
If your plan has stop loss insurance with another provider, you should review existing policy terms with your consultant or broker to prepare for the ACA's new requirements and ensure that your plan is ready for the changes ahead.
*Kaiser Health Care Costs p.7. In 2010, the U.S. spent $2.6 trillion on health care, an average of $8,402 per person. The share of economic activity (gross domestic product, or GDP) devoted to health care has increased from 7.2% in 1970 to 17.9% in 2009 and 2010. Health care costs per capita have grown an average 2.4 percentage points faster than the GDP since 1970.
**Kaiser Family Foundation Employer Health Benefits 2013; pp.56-62. According to a 2013 survey of employer-sponsored health benefits by The Kaiser Family Foundation and the Health Research & Educational Trust, more than half of workers that have coverage are enrolled in PPOs.