OCTOBER/NOVEMBER 2009

INTRODUCTION

Canadian insurers provide regular input to their group clients in an attempt to keep them informed as to the financial position of their programs. The information provided typically consists of what is known in the industry as “high-level” or “aggregate” data. Most plan sponsors, and the consultants who advise them, have grown used to working with this sort of input that provides summarized overviews of plan utilization. Cubic Health’s Mike Sullivan takes exception to this approach, however, suggesting that far greater cost control and far better program management can be achieved by focusing on an entirely different set of data. We have taken to subscribing to Mike’s perspective and are working with Cubic on behalf of our clients. This article, written exclusively for Krieger + Associates’ CommuniK newsletter, explains more.

Your Health Plan’s Biggest Asset

By Mike Sullivan, RPh, BSP, MBA
President, Cubic Health Inc.

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Managing extended health benefits (EHB) plans has become increasingly difficult in recent years. Health Care is a complex area to understand, and the level of reporting available to plan sponsors and their advisors at renewal time is limited. However, the benefits of better financial management of EHB plans are significant: ability to avoid passing increasing costs on to plan members, ability to enhance the benefit program with no added cost, and the opportunity to fund programs that can positively impact health and productivity where the budget may not have existed previously.

This all sounds very good, but it is important to realize that this isn’t possible to achieve by relying solely on “high-level”, aggregate data that is made available by carriers when they provide plan experience. To achieve meaningful savings within the plan, and to ensure responsible, long-term cost containment, plan sponsors need to look to the most underutilized asset in the area of group benefits – “transactional-level ” drug claims data.

Transactional-level claims data is blinded data (i.e. individual claimants cannot be identified) that represents every paid, reversed, and rejected claim made to the plan in a given period (usually 12 or 24 months). Aggregate-level data, the kind found in renewal reports, is often rolled up at the product or plan level (e.g. Top 50 Drugs lists, Top Disease classifications, etc.). Of real concern is the fact that aggregate-level input:
• Does not represent the entire plan experience in many cases (e.g. Top Drugs listings)
• Does not allow for looking at claiming trends at the claimant level
• Does not allow any insight into claims pricing and reimbursement

The easiest way for a plan sponsor to determine if the data they are accessing is of value is to ask the following question regarding the information they receive: “Using this data, can I quantify and prioritize exactly where the opportunities for immediate savings and long-term cost containment exist within my plan?” If you are using aggregate-level data to make decisions, the answer is “no!”

The State of the Union
Let’s say that if a plan has 500 employees (and let’s say that means 1300 total lives when dependants are added in) covered under its benefits program, it may be seeing as many as 12,000 or more paid claims per year within the drug plan itself. The transactional-level data file for this year would be more than 12,000 rows deep and include every paid, reversed, and rejected claim. Using this set of data gives a plan sponsor the power to isolate meaningful opportunities for cost containment.

The most logical starting point for plan sponsors using transactional-level data is to understand the “state of the union” (i.e. the financial health of their plan). If the plan isn’t broken – why would we fix it? However, if a given plan’s existing design isn’t completely optimized, wouldn’t it make sense to optimize what we can without changing the existing plan structure or design?

Using transactional-level claims data, a plan sponsor can assess all of the following areas of the current plan design as a first step in determining what needs to be done, and in what order:

• Benchmark plan-level metrics against national averages to understand how well the existing plan is performing.
• Measure whether or not the existing plan design is functioning as it was intended (e.g. are there issues with the plan contract and/or the adjudication of claims?).
• Quantify how well existing plan design features are containing plan costs. Are they sufficient? Will they continue to assist in cost containment?
• Quantify whether or not there are any issues with inappropriate use of the benefit by plan members (e.g. narcotic abuse) that isn’t being flagged.
• Quantify what impact, if any, inappropriate use of the benefit by pharmacy providers is having on the plan and determine what changes are needed to protect the plan.
• Identify and quantify what other opportunities exist to manage the drug benefit and any that can be introduced into future plan design changes.

By looking at the state of the union with transactional data, many plan sponsors have been able to identify opportunities for savings that often equal 4-8% of their current plan spending.

Population Health Assessment
Once a plan sponsor has completed an analysis of the current financial performance of the plan, if concerns have emerged that have suggested that plan design changes may be required moving forward, the best thing to do is determine what plan design will provide the greatest financial benefit without adversely impacting plan members. One of the greatest features of transactional-level drug claims data is that you can reverse-engineer the plan population’s medical profile using the same data.

Every plan sponsor can determine what areas need to be impacted with a plan design change in order to ensure that whatever design is chosen will serve the plan well over the next 3-5 year period. The other important aspect about being able to assess population health indicators is that it becomes possible to determine what kind of employee health and wellness investments would benefit the plan and/or to measure the impact of existing health and wellness initiatives to see what kind of impact that investment has had.

Modeling the Financial Impact of Proposed Design Changes
For plan sponsors who have decided that they do need to consider making plan design changes, it is very difficult making changes in the dark. The same set of transactional-level drug claims data can be used to model what the financial impact of any proposed plan design change will be on the current plan experience. This is helpful in cases where there are multiple options on the table for consideration, and for groups who want to ensure that any changes to the plan design will not adversely impact employees by eroding the value of the benefit being offered.

It is very interesting to see how sometimes the most basic plan design changes can have the most meaningful financial impact.

Integrating Drug Claims & Disability Data
Drug and disability plans have long been kept and managed in separate worlds. This is counterproductive because an optimally designed drug plan can positively impact the disability experience. Moreover, drug claims data can be used to improve disability management by identifying issues within the existing disability experience.

For plan sponsors that have seen significant increases in recent years in areas such as mental illness-related disability leaves, the opportunity to integrate drug claims and disability data together allows them to begin to isolate leading indicators of disability. Plan sponsors who have their drug and disability data with the same carrier have the advantage of being able to integrate the drug and disability data for the population of disabled employees separately from that of the non-disabled employees. This provides added insight into factors that lead to disability claims by comparing data relating to both disabled and non-disabled populations.

It is amazing what kind of doors can be opened by looking at transactional-level claims data. It is readily accessible from the carrier (it usually takes no more than 1-2 weeks to receive), and has the potential to open up a new world with respect to managing EHB plans.

Mike Sullivan is President of Cubic Health, an independent, Toronto-based drug plan management and analytics company. If you have any questions on the article, Mike can be reached at msullivan@cubichealth.ca

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