And how can you work together better to minimize costs while getting maximum bang for your organization’s benefits buck?

What’s New in Benefits & Compensation conducted an exclusive survey of 195 subscribers to find out how they view their company’s relationship with their brokers. Here’s what they said:

Half see room for improvement

The good news: Nearly half of your colleagues rate their relationship with their current broker as “excellent.” But that means the other half see some room for improvement.

Thirty-nine percent of respondents rated their broker relationship as satisfactory and said they were at least “reasonably happy.” The remaining 11% noted “unpleasant surprises” while 4% are actively considering a switch.

Tools for making buying decisions

Of course, the No. 1 reason any organization works through a broker is to find the best deals on health benefits. But many of your colleagues pointed to a few areas where their brokers could help make their lives a little easier.

First and foremost, your colleagues say they’d love for their brokers to provide user-friendly – but thorough – return on investment data they can use to benchmark different plans.

It’s worth discussing with your broker how much arm-twisting the broker can do with health plan carriers to get key data in your hands. Two specific areas of data benefits pros say they’d like help from brokers:

• obtaining and sharing claims cost data to compare to premiums, and
• benchmarking your typical plan costs against those of similar-sized firms in the region.

Unfortunately, claims cost data is often hard to pry loose from insurers, at least for smaller employers’ plans. Reason: Without this data, it’s tougher to judge if your premium rate adjustment at renewal time is fair. Fewer than half of respondents (46.3%) say they’ve ever discussed such information with their brokers.

Obtaining benchmarking data on similar-sized plans helps you see how comparably your costs and plan designs stack up in your area. Roughly 43% of respondents say they’re armed with at least some of this info when it comes time to decide whether to stay with the existing plan.

Earlier renewals

It’s worth talking with your broker about ways to push for the earliest possible renewals – and strategies for making sure your carrier doesn’t hit you with any unpleasant surprises.

One notorious game insurance companies play with employers’ plans is to wait until the last moment to reveal the new premiums at renewal. That way, there’s less time for negotiation – or to shop around with the insurer’s competitors.

About 28% of respondents report getting their renewals about 30 days before the rate kicks in. Different brokers use different benchmarks for securing renewals. A minority of respondents (19.5%) have seen them as early as 90 days ahead.

Taking work off HR/Benefits’ plate

The benefits brokerage marketplace is highly competitive. Some brokers try to set themselves apart by offering clients so-called value-added services.

Among your colleagues, the most popular services are those which relieve the company’s HR/ benefits manager of time-consuming tasks. Some examples:

• reviewing plan documents
• auditing (and, if needed, reconciling) carrier bills for errors
• monitoring plans for compliance (HIPAA, COBRA, etc.)
• offering tech support for a benefits intranet and/or employee self-service software, and/or
• assisting with employee education.

Coordinating benefits: It’s one of the easiest areas to mess up, and one of the of costliest to correct after the fact.

If an employee or dependent is eligible to collect benefits from two or more plans (e.g., your disability plan and one from a spouse’s employer), which plan pays first?

Answer: It depends on what’s written in the plan document. Usually, if a plan contains no coordination-of-benefits provision, it’s expected to pay first.

Who goes first?

Most benefit plan documents contain some sort of coordination-of-benefits procedures. Even so, there are common loopholes to watch out for.

Three hot spots to check:

• Double-check to be sure that your benefit plan documents require any outside plans to attach the original Explanation of Benefits from the primary payer when your company’s plan is balanced billed for a claim
• Make sure there’s a statement that says only the amount actually paid by each plan will be charged against the maximum benefit, and
• Be sure there’s an order of benefits determination that spells out which plan pays first for an employee’s child if the worker is divorced from his or her spouse.

Likewise, if your firm offers domestic partner coverage, make sure there’s a coordination-of-benefits statement for dependent and non-dependent partners.

Heavy cost of mistakes

Coordination-of-benefits errors can easily run up your premiums if left unchecked.

In one extreme example, a Fortune 500 company’s health plan wound up paying a needless $5 million worth of claims that should’ve been paid in full or in part by other plans.

When you include indirect costs such as added administrative time, late payment interest and additional TPA contact call center expenses, the final cost was closer to $12 million.

Best practices

Even if you’re unaware of a coordination-of-benefits problem with any of your plans, it pays to do  a periodic self-audit. Three steps:

• Gather all payment schedule materials related to your plans into a binder, including renewal letters from vendors
• Check the plan document against the payment schedule used by Payroll or your TPA, and
• Update any outdated schedules or benefit descriptions.

Reminder: If you don’t have a formal plan document, your contract with the vendor legally serves as the “control document” for the plan.

In order to be effective, the program must meet participants’ individual medical and psychological needs, not to mention your own organization’s need to control long-term health costs.

How wide-reaching should the program be? After all, it doesn’t make sense to pay for services your employees don’t want or can’t use.

Mary Beth Chalk of Resources for Living suggests that obesity programs can be broken down into four tiers of employee need, from which your organization’s return on investment (ROI) can also be measured.

Tier 1: Education

Tier I employees struggle with weight management problems but don’t need a health coach.  Instead, they may benefit from a self-directed program that provides weight-management related materials online, targeted mailing, and/or access to nurse call line.

How to measure ROI: utilization. Do employees click on the Web site? Do they return to the site regularly? Do people use the nurse line? Your program vendor should provide you detailed use stats.

Tier 2: Clinical supervision

If the employee has been diagnosed as obese — a body mass index (BMI) score over 30 is obese, over 35 is clinically obese — he or she would do better working with a health coach in a clinically supervised program.

Three keys to getting maximum results:

1. Periodically have participants rate their relationship with their health coaches. Not everyone clicks, so a change may be in order.
2. Coordinate your disease management care with your employee assistance program (EAP)services. Reason: Inability to control weight is often closely tied with mental health issues — and one can negatively affect the other. The more closely your EAP and obesity program managers work together, the higher the chance for success.
3. Beware of the fade-out effect. Many employees in weight-loss programs get off to a great start and then fall back into old habits. People should re-commit to the program after three sessions, four months and nine months.

To measure ROI, look at utlization, goal achievement and reduced presenteeism. Of course, presenteeism is notoriously difficult to measure with reliable dollar figures. So how can you overcome that problem?

• Start with employees’ salaries. Let’s suppose one participant earns $40,000 per year.
• Ask workers to self-report how energetic and productive they feel on the job, on a percentage scale. Then have supervisors estimate the employee’s productivity and split the difference. For this example, let’s assume it averaged to 50%.
• Collect scores again six months and one year into the program and then multiply the difference by salary. The result is your estimated productivity ROI.

In the example above, if the employee earning $40,000 improves from 50% to 75% after one year, the productivity related ROI is $10,000.  

Tier 3: Medical management

At this level, the obese employee needs a higher level of care than a health coach can offer. The employee has chronic health conditions related to obesity — such as diabetes, high blood pressure, and/or sleep apnea — and needs a physician case manager. Specifically, the employee needs to set up regular visits with the doctor and create a treatment plan.

To measure ROI, start with the lower-tier criteria, then track quarterly and year differences in FMLA or paid absences, and prescription drug costs. Then compare it to the per-participant cost of the obesity program.

Tier 4: Morbid obesity

At this level, the employee has been diagnosed as morbidly obese — BMI over 40 — and is considered a potential candidate for gastric bypass surgery.

ROI is measured through ongoing health claims as well as the previous criteria.

A What’s New in Benefits & Compensation reader shared a real-life horror story of a 401(k) presentation that may have actually hurt enrollment:

The firm’s 401(k) vendor sent a rep with whom the benefits manager had never previously spoken. The rep who’d done the company’s presentation for many years had recently changed jobs.

 To put it politely, the new speaker was not nearly as accessible or well-prepared as the first.

On the day of the session, the rep showed up late, with barely enough time to set up before employees came in for the presentation. To make matters worse, he hadn’t done his homework on the company or its employees.

In the course of about 20 minutes, the rep forgot the company’s name, misstated the employer’s matching contribution rate (the firm offered a 6% match, but the rep told attendees it was 10%), and generally came across as a buffoon. 

The company’s benefits manager corrected the speaker about the contribution rate. Rather than smoothing it over by saying something along the lines of “six percent is still quite a generous match” — or even simply apologizing — he tried to make a joke.

He told employees that they ”should marry someone rich” in order to make up the other four percent. 

The bad standup comedy act continued, in the form of mime and insults.

“Having a 401(k) means you can sleep soundly at night when you’re ready to retire,” he said,  punctuating the point by making a pillow gesture with his hands and placing his head down on his hands.

Employees in the room rolled their eyes.   

He then wrapped up his presentation by dramatically pointing his finger at random people in the room.

“What we’d like to see is for you [point], and you [point], and you [point] and EVEN YOU [points at the benefits manager] to get started today, because every year you miss costs you money. Signing up for the 401(k) is the smartest decision we all [waves a pointing finger across the room] can ever make for ourselves and our families.” 

The benefits manager cringed. Nothing like asking employees to take time out of workday to have their intelligence insulted — and the generosity of their benefits poked fun at.

Needless to say, the employer wasn’t interested in an encore. The next time around, the company insisted the vendor send a different rep.  Thankfully, the would-be comedian no longer worked there by that point and the new rep was polished and professional.

What was the worst experience you’ve ever had in a benefits meeting or presentation at your company?

Here’s one often-overlooked area where you may be able find some health cost savings.

Start by asking this question: Are you paying to insure people who shouldn’t even be on your health plan?

It’s estimated that most employers needlessly spend an extra 5% to 15% by carrying ineligible people.

Insurers have no incentive to fix

The problem springs up when your insurance company continues to charge you for enrollees who are no longer eligible for coverage but were never removed from the rolls.

The issue often goes undetected until you initiate the steps needed to find and fix it. Insurance companies have no incentive to do anything about it. It’s not costing them money, after all. It’s costing you.

The usual suspects

There are four main groups of people who often manage to fly beneath the radar screen and remain covered under your plan even when they’re no longer eligible:

• ex-employees
• current employees who’ve changed from full- to part-time status
• divorced employees’ ex-spouses, and
• older dependent children.

Each category has its own set of challenges to fix, but that can be done with relatively little pain.

Track ex-worker coverage

Without knowing it, your company may still be paying for doctor’s visits made by ex-employees. This doesn’t mean former employees who accept COBRA, paying 102% of the premium each month to keep their coverage and offset your administrative costs.

Rather, the concern here is to spot freeloaders, whose insurance cards were never canceled, while your firm continues to foot the bill. This problem happens more often than you may think.

Some firms generously offer to carry certain ex-employees for a certain period of time and then forget to cancel their coverage. But more often, it’s a clerical error by the insurer that goes undetected.

Be certain there’s someone at your company who tracks when people’s coverage period ends: both on the active rolls and on COBRA.

Ask Payroll about part-timers

Depending on the eligibility rules in the plan documents of your health policy, an employee who scales back
on hours may become ineligible for coverage under your health plan. If that’s the case, ask Payroll to run periodic reports on the enrollment status of the folks whose hours have recently dropped.

Remember: COBRA applies. But you needn’t pay for part-timers’ ongoing coverage.

Employees slow to report divorce

It’s an unpleasant fact of modern life: half of marriages end in divorce. Unfortunately, there’s often a
spill-over effect on an employer’s health plan after a divorce.

Employees often fail to notify their employer about an impending divorce.  As a result, after the divorce, the firm continues to pay for coverage for the ex-spouse. There are two tactics that can help minimize this problem:

• The “empathetic” approach: Pledge complete confidentiality.
• The “hard ball” tactic: Add a spousal surcharge to employees’ monthly contributions, which greatly increases the odds of prompt reporting of a divorce.
   

In times like these, it’s crucial for colleagues to share their concerns, experiences suggestions. A few weeks ago, HRBenefitsAlert.com ran a special report on calming employees’ 401(k) fears. The reader comments revealed that many benefits pros were just as afraid as employees, and people’s frustration led to some unfortunate carping back and forth between several readers.

The purpose of the comments section, apart from giving people the opportunity to react to the story, is to provide a forum for benefits managers to interact. It’s my hope that we can generate an exchange ideas that have (and have not) been working at readers’ companies during the current situation. Specifically:

• What are you doing to manage health benefits costs as budgets are either frozen or shrink?
• Have you noticed a dip in morale or productivity with all the doom-and-gloom in the news?
• How is your company trying to calm employees’ fears about salary freezes or layoffs, 401(k) losses, health cost shifting and other issues that get a lot of mainstream media focus?
• What are you saying to employees to deliver the news they need to know but also keep morale high?

Thank you in advance for your willingness to share your expertise and personal experiences. Everyone benefits in the long run.

On a scale of one to 10, the average U.S. employer rates its pharmacy benefits manager (PBM) a 7.8, according to a study of 540 firms by the Pharmacy Benefit Manager Institute (PBMI).

While many What’s New in Benefits & Compensation and HRBenefitsalert.com readers we know are less than thrilled with the PBM industry, the PBMI study offers valuable insights into the issues your peers care about. Far and away, employers’ biggest concern is transparency of drug costs.

Survey respondents said they want to know if they are really getting the best deal on prescription drugs. Twenty-eight percent of respondents said their PBMs made their drug costs “completely transparent” (but that also means 72% see room for improvement). Other key issues:

• two-way communication. Employers want PBMs to make an effort to understand their clients’ needs as individual organizations, and
• administrative services. PBM involvement in drug benefit management varies greatly and employers want to see measurable quality standards.

In reality, incorrect billing alone causes 5% or even as much as 10% of total premium costs to be wasted. According to Business Insurance Magazine, there are 7% average inaccuracies in carrier bills, and only 2% are ever corrected.

For an employer with 250 employees, that’s $50,000 wasted a year. The cost jumps to $100,000 if there are 10% inaccuracies.

Carriers don’t mind – But you should

According to health industry data, there’s about a 10% inaccuracy rate on bills, but it’s a break-even proposition between overcharges and undercharges. But it’s the carrier who breaks even, according to brokerage and consulting firm Corporate Synergies, not the plan sponsor.

Let’s assume the overcharges and undercharges really did even out after you analyzed and reconciled the carriers’ bills to correct any mistakes. Guess what? You’d still be losing money because in-house billing reconciliation is a productivity drain.

The carriers’ calculations don’t take into account your company’s time commitment to do the reconciliation and spot the errors every month.

It also doesn’t figure in the time your company spends on the phone arguing with carriers to get your refunds every month, nor does it account for the hassle caused by carriers who fail to credit refunds against their maximum retroactive refund period of 6 or 9 months (depending on the carrier).

Proven solutions

Depending on your company size, the best practice is to audit your claims on either a monthly or quarterly basis. This can be done in-house, or outsourced. Some benefits brokers perform this service on behalf of clients as a way of differentiating themselves from their competitors.

Another important tactic to end the cycle of overpayment is to shop out your coverage every year. Carriers won’t work to correct the flaws in their bills to you unless you shop your plans aggressively.

Employers have discovered that they’re bound to pay one way or another. It’s often better off to deal with the predictable costs of offering coverage, rather than the hidden costs of not offering it.

In the late 1990s and early 2000s, the trend was for employers to eliminate dental (and vision) coverage as a way to offset the rising cost of primary health plans. Employees were encouraged to use medical flex accounts to offset the cost.

Two problems: Employers still paid the cost through lost productivity – an employee scrambling to find a dentist for himself/herself or a dependent is an unproductive employee that day.  And apart from routine yearly checkups, dental costs are notoriously hard to predict when employees budget their FSA contributions for the year.

Familiar ideas

The good news: Many of the strategies that help control traditional healthcare costs also seem to work for containing dental costs. These two familiar approaches are gaining popularity, according to the Segal Company’s 2008 Survey of Dental Benefits:

• DPOs and DMOs. Similar to PPOs and HMOs, these are managed care plans for dental bennies. As with an their primary health plan counterparts, the idea is to make sure employees are steered to the most cost-efficient level of care for their medical needs, and
• Self-insurance. This approach significantly lowers overhead and stop-loss coverage for catastrophic dental claims is often more affordable than for other types of claims. Another option: You can lease an insurance company’s dental plan.

The survey finds that 85% of companies either offer dental coverage – or are considering it. If it’s not in the budget to offer a fully or partially company-paid plan, voluntary plans remain a popular option. In the end, the most expensive option is to leave employees to fend for themselves.

The alternative: value-based health plan.

The main complaint about high deductibles is that it’s a pennywise-but-pound-foolish approach.
In an effort to avoid paying out of pocket, many employees avoid seeking treatment –- including essential ones that could head off major health problems (and exponentially higher costs) down the line.

In a value-based plan, the idea is to reward employees for seeking treatments that promote wellness.
The more clinically viable the treatment, the less an employee pays out of pocket for it.

Example: Women over 40 and younger employees with a family history of breast cancer pay less for a yearly mammogram than employees for whom the test isn’t as necessary.

Value-based plans often work better than high-deductible plans when used in combination with standard wellness program features such as health risk assessments.

Five target areas

According to the May 2008 issue of Simply Well,  there are four quality-of-care criteria that have emerged as key benchmarks of the quality of care: health care management, preventive screenings and treatments, member service and access to care.

Some areas of particular concern:

• Employees’ dependents receiving appropriate and timely childhood/adolescent immunizations
• Breast cancer screenings for female health plan enrollees, ages 52 to 64
• Diabetic employees receiving hemoglobin A1C and LDL-C testing
• Members receiving proper referrals and treatment for mental health issues (e.g., primary care physician refers a patient to a specialist to ensure proper prescription and management of an anti-depressant medication)
• Pregnant employees receivig time and appropriate prenatal and postpartum care, and
• avoidance of antibiotic treatment in adults with acute bronchitis.

The quality of care for many of the aforementioned issues can suffer when employees foot too much of the bill out of their own pockets. The hope for value-based plans is that employees get some cost relief and obtain treatments that will reduce costs in the long run.