In today’s health care system, there’s a lot of misalignment. People feel the insurance companies are just out to make money. They perceive that the providers are struggling and building more services, more MRIs, more tests, more this and that. And the member is caught in the middle, says Mark Haegele, regional vice president of sales at HealthLink.
The employers aren’t in alignment with the insurance company. The insurance company isn’t really in alignment with the member. And the member isn’t in alignment with the provider.
Many in the health care industry are working to change that.
“It goes by a lot of different names in the industry, and I don’t think that the industry has settled on a specific name because there are so many different variations on the theme,” Haegele says.
Whether it’s a narrow network, community-based model, exclusive provider organization plan, accountable care organization, etc., the idea is to get everyone on the same page and create more of a partnership amongst the stakeholders.
Smart Business spoke with Haegele about how gain share models fit into this growing trend of alignment.
What is a gain share model?
In self-funded health insurance, gain sharing may be a component of provider to employer direct contracting. The employer or its third-party administrator (TPA) designs a benefit plan in partnership with a selected provider. In exchange for the employer directing business to the provider, the provider will agree to lower unit costs. The TPA creates and administers the benefit design and projects estimated costs. If the costs come in less than the projection, the employer shares those savings with the provider.
With a self-funded plan, an employer is buying stop-loss reinsurance. The underwriter looks at the employer’s claims experience, group demographics, etc., in order to predict the expected claim cost. The stop-loss insurer begins to provide insurance at what is called the maximum liability, which is usually the expected claim cost times 1.25. In a gain share model, the providers take on that 25 percent risk corridor between the expected claim cost and the maximum liability.
If costs come in lower than expected, in some cases the employer will share 50 percent of that underage with the provider.
Why would a health provider take on that risk of potentially added costs?
First of all, they want to make sure the preferred plan design that they’ve helped create succeeds. This makes the arrangement even more attractive to the employer.
Also, the hospital knows it will be getting a higher volume of patients, as fewer of the members receive care at other hospitals, so it may be willing to take on extra risk for that extra volume.
The provider is taking on a much bigger role managing the care. They have more ability to directly communicate with the membership, as well as get reports from the TPA on what’s happening within the plan. For example, it can better onboard members and align them with a primary care doctor, which in turn lowers emergency room visits and keeps patients compliant with their health care.
Employers can focus on running their business, and the provider takes on more risk, in order to potentially share in some of the gains for spending its time and resources on managing care, which is their expertise.
How have hospitals responded to this idea?
It’s interesting. Certain providers are all over it, and others are hesitant and want to crawl before they walk.
One difference maker has been that people don’t want to get a call from their insurance company to talk about their diabetes, blood pressure, etc. But if their provider calls them, it’s actually better received and more likely to result in better health.
In this new model, the member, provider and employer are working together to control costs and better manage the members’ health.
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