Five Steps to Reduce Company Health Insurance Costs

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by Dr. David Rearick, Chief Medical Officer of Coalition America, Inc.

With healthcare costs again creeping toward double-digit levels and business profits still lagging, top corporate managers must take a personal and pro-active role in addressing those factors that drive up medical insurance costs. That is an assessment by leading companies and consultants who work with corporations to manage their healthcare costs.

"We have entered another period when medical insurance costs are moving upward," said Dr. David Rearick, Chief Medical Officer, Coalition America, an Atlanta-based healthcare cost containment company.

At least two factors are converging to push medical costs upward:

  • Patients and doctors have successfully rebelled against the strictures that HMOs used to control costs;
  • Doctors have organized to leverage their market power.

"What too many HMOs offered was not managed care, but managed costs," Rearick said. "Now, many of the controls are being removed, so doctors are regaining power over treatment at a time when people are growing older, creating growing consumer demand for healthcare and state legislation mandating healthcare services."

Combine this environment with the liabilities– including RICO prosecutions – that large companies face today when medical treatment is questioned or denied and you have a perfect stew for rising healthcare costs.

However, corporate managers are not powerless and the quest for better managing employee healthcare costs is not hopeless as long as they take personal, direct action to manage these costs.

That conclusion was underscored by a recent Labor Department study that looked at medical insurance costs over a two-decade period. That study showed that the single most significant factor in controlling healthcare costs is the aggressive involvement of corporate managers in addressing the factors that drive up their insurance rates.

What can managers do? Here are five key steps that your organization can take to lower its employee medical insurance costs:

  1. Supplemental Healthcare Networks – Most companies have one primary HMO, PPO or other healthcare provider. That is great for employees who live in that network's trade area. However, you pay full retail prices for employees who travel or live outside your primary network and need healthcare service. One way to lower your costs is to investigate supplemental networks to back up your primary provider, particularly if you have employees who live or travel extensively outside your primary network's coverage area. Operators of supplemental networks will reprice your out-of-network bills and apply their discounts to the services received by your employees.

  2. Negotiations – Companies negotiate all the time. However, the one area they often fail to negotiate is healthcare services, which is a mistake. Healthcare is now the most negotiated service in our economy and providers routinely expect to negotiate their fees. They will negotiate even after the service is rendered, priced and billed. By negotiating with providers – particularly providers outside your primary coverage area – you can achieve considerable savings on medical costs.
  3. Primary network management – if you have significant numbers of employees who live or work in areas outside your provider's coverage area, you may need additional primary networks in areas where you have employee concentrations. Many large companies are completely outsourcing their healthcare network management to outside cost-containment companies who are experts in managing these services.
  4. Technology - Healthcare is still the most paper-dependent form of information management left. However, that is quickly changing. Recent laws are forcing anyone in the healthcare management chain – employers included – to protect more rigorously employee healthcare information. That means more healthcare claims are being handled electronically, which reduces copying, handling, storage and transfer costs, while providing better security. For example, a new system called EDI Plus! has the potential to revolutionize the way claim forms are moved from employer to insurer to provider and back. Using EDI (Electronic Data Interchange) technology, paper files are quickly and accurately converted to digital formats. These are areas where an investment in technology can generate real paybacks.
  5. Outsource it all – Many large- and medium-sized companies would like to throw up their hands and get out of the business of providing employee health coverage. Unfortunately, competitive and, ultimately, government pressure probably precludes that step. An intermediary step could involve outsourcing your organization's healthcare operation to a cost-containment group. Cost-containment companies not only manage HMO, PPO and other insurance relationships, but look at the totality of your organization's healthcare operation to find innovative ways to save. They are experts at it. They know how to setup and manage primary and supplemental networks. Some will even negotiate with every bill – no matter how small – to get the optimum savings from each transaction. An added benefit of outsourcing is a reduction in your company's overhead among the employees now handling your healthcare claims.

These are just a few ways to manage your healthcare costs. However, as healthcare costs continue to rise, you need these and other strategies to protect your bottom line.

Yet, through aggressive management, companies can successfully hold the line on medical coverage costs. The cost-containment companies that use these strategies report savings up to 30 percent in some cases. With almost $30 billion wasted annually in healthcare transactions, your savings could be pretty substantial – if you are willing to manage the process.

Coalition America, Inc. is a healthcare cost containment firm headquartered in Atlanta, Georgia. Coalition America works with self-insured corporations, third party administrators, insuring organizations and other business entities to help them find ways to lower the cost of employee health insurance.

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