Unique opportunities for self-funded employers in the face of COVID-19

The impact of COVID-19 on US businesses has been swift. Just under two months since ‘social distancing’ became a thing, more than 20 million Americans have filed for unemployment and nearly 90% of the remaining US workforce is working from home. There is no doubt left in anybody’s mind that business models and structures are going to permanently change and leaders are now faced with making hard choices. A recent survey found over 90% of CFO’s are looking to implement cost containment initiatives and almost as many fear productivity loss, short and long term.

HR leaders are at the center of it all, advising executive teams on human capital decisions, pondering the key focus areas of lean cost optimization strategies, and looking to implement positive changes in company culture to increase productivity. All this while orchestrating entirely new ways of doing business, these ‘HR warriors’ are being vigilant in their planning to ensure their companies are positioned to retain and attract talent once we return to a new “normal” without the luxury of any insight for how that might look.

Despite all efforts to be proactive, a major component of cost optimization and cultural change initiatives is not changing like it should be.

Companies are not innovating how they view their healthcare costs and optimize for savings. It’s a myth that employers have little to no control over this complex and controversial expense.

• What are the biggest impacts COVID-19 will have on employers’ healthcare costs?
• Why are self-funded employers in the best position to do something about it?

COVID-19 impact on already skyrocketing healthcare costs

As a direct cost to employers, healthcare has increased 75% over the last decade. — that’s considerably more than the rate of inflation and average salary increases combined. Now, COVID-19 has wreaked havoc on our socioeconomic wellbeing and opens the door for significant new increased healthcare costs for employers — most of which we don’t even fully know about yet.

Right now, dramatically less than normal benefits utilization is and will continue to occur as people are sheltered at home and doctors are not available for non-urgent issues. For the months following as we return to work, we can expect a significant spike in benefits utilization as people look to get back on track, treat issues that went untreated during the peak of the pandemic, and address their fears and anxiety of what just occurred and what the world is like now.

Most likely, employers will see little impact in 2020 because their premiums are locked in with their carrier. However, all bets are off in 2021 and beyond.

Is the health status of your employees going to improve or get worse over the next 12 months?

Imagine you are an underwriter. Your reality probably involved waking up with cold sweats on a regular basis as you’ve witnessed a highly contagious virus in Wuhan, China grow from a concern to a pandemic in three short months, bringing with it exponentially climbing death and infection rates. You’re aware of findings that nearly 90% of COVID-19 admissions involve comorbidities. And, being an astute underwriter, you’re aware that the best case scenario for a SARS-cov-2 (aka COVID-19) vaccine is mid to late 2021 and you’re asking yourself the ‘what-ifs’ around SARS-cov-3, or 4? Highly relevant questions that currently have no answers.

As a CFO or HR leader, you need to have bargaining power for stop/loss or carrier premiums in 2021. Can you confidently answer questions like, “Is the health status of members (employees and dependents) improving or getting worse over the next 12 months? “Are your engaged plans and programs focused at the member level?”

If not, you may want to brace for impact.

Unfortunately, that’s not where this story ends as your health-related productivity losses are about to increase dramatically for the long-term if measures aren’t put in place to counteract.

Health-related productivity loss is a long-term concern

Even before COVID-19 came along, health-related productivity losses, and indirect healthcare costs, were a major factor and of growing concern. The nonprofit group Integrated Benefits Institute, or IBI, conducted research in 2018 with employers across the US and found illness-related productivity loss cost employers $530 billion. That’s the equivalent of two-thirds of healthcare dollars spent ($880 billion) by employers in the same time period. In comparison to today’s numbers, direct and indirect cost of productivity loss is over $2 trillion.

Are employees engaged and empowered with tools for making smart healthcare decisions?

In the wake of COVID-19, pre-existing, worsening, and or undiagnosed health issues will exacerbate. Health-related presenteeism, absenteeism, and turnover will increase due to heightened and widespread fear, anxiety, and even panic coupled with limited availability of healthcare professionals as they focus on urgent cases only.

36% say COVID-19 is seriously affecting their mental health… 59% say it’s having a serious impact on their daily life. — MedScape survey, March 2020

Most people affected emotionally by the events surrounding COVID-19 are in a state of grief.

The Kübler-Ross Five Stages of Grief suggest dealing with grief is a process: denial, anger, bargaining, depression, and acceptance. Getting to the point of acceptance is an individual journey that may be days, weeks, months or even years.

Many employers have instituted wellness and other programs but how do you know these are effective? Are these closely monitored for utilization and effectiveness? If not, it may take 1 to 2 years before realizing they’re doing little in terms of increasing productivity. If so, are the metrics easily available, organized with other programs and plan data, and focused on cost drivers at the employee or family member level? And finally, if you do have access to this information, would you know the steps to take for corrective action?

Here is why self-insured employers are best positioned to cut costs

110 million Americans receive health benefits from a self-funded employer. Of those, 40% receive their benefits from a small to medium enterprise (SME) employers, arguably the hardest hit by the circumstances of COVID-19. These SME employers may be exposed to greater risks, yet are more capable of sidestepping the high costs coming their way.

Self-funding is the transfer of financial risk from an insurance carrier to the employer. The advantages can be significant, including savings on inflated commercial insurance premiums, tax breaks, and flexibility in choosing and managing health plans and providers. In simple terms, it’s a pay-as-you-go model where the employer is now the insurance, bears the risk, and provides and pays on the actual costs instead of set premiums. Properly managed, it gives employers more control and flexibility over their healthcare plan’s destiny.

Another often overlooked advantage is now there is increased transparency. Employers can now access data that can be used to mitigate costs and risk. When this is utilized properly it can expose cost drivers and risks that were previously unseen and take the right action to continuously reduce costs.

However, self-funding is not guaranteed savings — there are additional overhead costs and risks and requires strict management and oversight. According to annual self-funding reports on kff.org, every year 2–3% of self-insured employers either return to fully insured or worse, stop reporting altogether (uh-oh). To mitigate these risks, employers engage a number of vendors to help manage and administer employee health benefits but, this too has its own set of risks.

Barriers to healthcare cost optimization

Increasingly, business leaders are expressing demand for more control and insights on healthcare costs and risks. This isn’t surprising considering healthcare costs are typically the second highest line item on operational expense reports after payroll. Poor population health is the leading cost driver in productivity loss, and has the highest inflation rate compared to most if not all other business line expenses.

The champions of self-funding are HR leaders and CFOs who have the best intentions for their employees, and for their business . This is evident in their move to self-funded models, adding wellness and other programs, and trying to provide the best possible benefits packages. These champions know their job, know their industry, but typically lack industry experience in healthcare. In smaller and middle market companies, they are extremely busy people who wear multiple hats in a day and are acutely aware of the rising cost of healthcare, but overwhelmingly feel there’s little to nothing they can do about it. Combined, these factors equate to a heavy dependency on a list of vendors in hopes they will contain costs on their behalf. And so it goes; so much so that the norm is, well, just sign the check.

Why technology isn’t helping

For other high-cost lines of business like sales, marketing, and product development we deploy modern, experience-driven technologies to increase productivity, and they typically work. Yet for healthcare cost optimization, unified solutions designed for employees, vendors and employers, that integrate well with their back office and business tools are not available. Instead, employers are left with siloed data that can be hard to interpret and is spread across provider systems like medical, dental, vision, pharmacy, labs, etc. They are often contained in fragmented, antiquated systems that are designed for the healthcare industry, not HR professionals and CFOs.

Businesses are often provided this access too late. The data is largely historical, which means the sunk cost from 3, 6, or 12 months ago has already been realized and could have been saved if known sooner.

“Expect change. Analyze the landscape. Take the opportunities. Stop being the chess piece; become the player. It’s your move.” — Tony Robbins

What do employers need to save on healthcare in the wake of COVID-19?

Realizing healthcare cost savings only works if a solution is available that isn’t so cost prohibitive it’s out of reach. And more importantly, it has to be designed with consumer-centric usability in mind; otherwise it’s yet another analytics system that doesn’t get leveraged.

Here are key focus areas HR leaders should evaluate when making the move to control healthcare costs:

Empowered and engaged employees — Make smart healthcare decisions a part of your company culture with private and secure apps for employees and their families that deliver real-time cost savings and quality control broken out by geography. Some examples include:

1. Real-time alerts on best prices for prescription and over the counter drugs,
2. Transparency into who the best providers are based on national and regional benchmarks,
3. Assistance with guiding patients to urgent care visits vs. ER,
4. Provides transparency in an easy to use interface that doesn’t change when plans and providers do.

Designed for Humans — A system designed for busy professionals who need easily retrievable information at their fingertips. Includes capabilities to share, delegate, and collaborate in a straightforward, modern design (without all the industry jargon!) while still allowing for granular, deep-dive cost analysis.

Connected ecosystem — An enterprise platform that unifies claims — medical, pharmacy, dental, vision, labs, programs, vendor and back office systems like finance and CRMs, while allowing end-users to track their health in real-time. With real-time integration support for most commercial internet of medical things (IoMT) and wearables.

Actionable insights — An always-on digital coach that uses billions of data points and credible content to deliver cost savings opportunities while keeping your vendors on the same page and seamlessly working on your behalf.

Robust, Enterprise platform — Always-on, 24/7 available system built on a foundation of proprietary, deep penetrating analytics and predictive models with flexible enterprise reporting for executive summary dashboards and reports allowing sharing and export based on role.

In this time of uncertainty, embrace change. Your employees will thank you for it.

Healthcare cost hikes are coming in the wake of COVID-19 and self-insured employers have an opportunity to save, optimize, and engage employees and their families to play an active role in improving outcomes. As the champions of self-funding, CFOs and HR leaders can move forward with cost optimization strategies that include healthcare savings with confidence, and praise.

If you want to share your story, feel free to reach out at info@unna.io. Maybe we can help or, just be a sounding board as you’re probably still sitting at home waiting for this to end, just like us.

Jason Bennett is the CEO of Unna, a Pacific Northwest digital health company helping employers optimize healthcare through deep, actionable insights of unified health and business data, cost transparency and empowered employees all in a consumer-centric experience.