As self-insured employer groups—or administrative services only (ASO) partners—manage a growing percentage of the commercial population, the demand for them to have visibility into payment integrity measures implemented by the administering plan is growing. On the first episode of Cotiviti’s new Payment Integrity Insights podcast, we dive deep into best practices and challenges in ASO payment integrity, including:
- How to decide on an opt-in versus opt-out approach
- How to communicate the value of payment integrity for self-funded employer groups
- How to support employer groups in implementations and reporting
Cotiviti’s Brett Arnold, senior vice president of product development, is joined by Allyn Sullivan, vice president and senior client engagement lead, as well as Jay DeLaRosa, vice president of prospective payment integrity. Stay tuned for future episodes of Payment Integrity Insights on Apple Podcasts, Spotify, and anywhere else that you get your podcasts.
Interested in going even deeper? Read our white paper, Payment integrity: Getting self-insured employer groups on board.
What do we mean by ASO (administrative services only)?
Allyn: ASO, self-funded, and self-insured are all used more or less interchangeably. Essentially what it means is that an employer is able to act as its own insurer taking on most or all of the risk associated with the claims and medical benefits for their employees. The insurance company is therefore acting as an administering plan or a TPA on behalf of the employer group. An employer does have to qualify under ERISA laws to be able to act as an ASO. So not all groups will be able to serve as their own risk-bearing entity.
We know that more and more members are being covered by self-funded groups. What does the data look like?
Allyn: Well, it is more ASO than you would expect. So about 65% of all members belong to an ASO group. When you look at large groups and extremely large groups such American Airlines or Amazon, you're, you're up to about 82% of membership in those large groups that are covered by this type of an ASO arrangement. In addition to that, medical costs are increasing about 5.5% on average across the self-funded groups versus only 3% when you're looking at the fully insured commercial population.
Jay: I completely agree. I think more and more self-funded groups are predominant. We saw it play out in the more than 10 years that I was at a health plan where when I started, the commercial split was closer to 50/50, and by the time I left, it was closer to 80/20.
So healthcare is getting more expensive. How are those healthcare cost increases affecting employer groups and how much do the network discounts that payers are getting them help?
Allyn: According to PricewaterhouseCoopers, the consulting firm, our healthcare costs are going to balloon up to about 7% next year, and this is related to labor shortages, drug pricing, and just contract renewals with the providers. So the network is just getting more expensive as a result of some of those contract renewals. Another source, the Center for American Progress and Kaiser Family Foundation have also given quotes that are anticipating that the premiums that we pay as members are anticipated to rise over the next five years about 13% for the fully insured book of business and about 18% for the self-funded employer groups. which is really telling you that these employer groups, while they are their own risk-bearing entities, are struggling much more to maintain their healthcare costs and really try to realize more savings over time as compared to their fully insured counterparts.
Jay: And the competitive environment is really changing for payers. It goes beyond discounted rates with their contracted providers. Payers must really ensure that their claims paid to providers from employer group also meet payment criteria and are not overpaid.
Some recent news also shows us that the stakes are raising for health plans and managing these costs. Can you tell us more?
Allyn: Well, one item that's been in the news quite a lot lately is that the employers are now looking at the health plan's fiduciary responsibility when these ASO groups or these large employers are signing up for a particular health plan to administer their claims. And so what that means is that basically the health plan is not using the same processes, they're not using the same vendors, they're not using the same cost saving mechanisms with their fully insured business and their ASO business, and therefore they're realizing more savings on their fully insured book of business. And now these large employer groups are saying, why is that? There really needs to be some parity and the health plan should use as much diligence in their cost savings programs on the ASO groups, just as they are in the fully insured realm.
Jay: In my plan, we treated our ASO claims as if fully insured, even if they didn't necessarily go live at the same time—they tend to closely lag behind our fully insured business. We felt strongly from the provider experience standpoint that they should be the same. Providers don't know the funding source. So when they get disparate results on members with the exact same claim codes, it's a bit confusing for them. So we try to edit all of our claims, whether they were ASO, fully insured, home-host, all the same. We also had ASO clients that would contract with third-party vendors to audit our claims and essentially grade our payment integrity capabilities. At renewals, these audits were material and they became part of the negotiating strategy on behalf of the groups. So a strong PI program is critical to us maintaining competitiveness in the market.
What are some best practices to support employer groups in implementation and operations?
Allyn: The health plan needs to look and confer with legal and determine whether they already have an opt-in versus an opt-out strategy. Opt-in means that you're offering sort of an a la carte menu, if you will, to your employer group and letting them choose which of the program integrity functions or really any of the health plan functions and have the health plan really administer them. But they are giving carte blanche to the employer group to say which of the options on the menu that they want to select. So while that sounds great and sounds like the employer group has a lot more control, it actually really puts a very large burden not only on the ASO group, but also on the health plan themselves, and being educated and being able to speak to all of their employer groups and educating really their group sales division on all of these different types of products and being able to really “hard sell” those types of things to the ASO groups.
And therein lies some of the problem when you're talking about some of those lawsuits that we mentioned earlier. With respect to the fiduciary responsibility, the contrast to that is called an opt out. And what that means is that the health plan has really vetted these vendors, these programs both prospectively as well as retrospective payments, meaning before the claim is paid versus a recovery after the claim has already paid. And they have already vetted all of these vendors and all of these programs, and they said “this is our best practice. This is what we recommend, and therefore an employer group, you're going to be enrolled in all of these things by signing up with us as opposed to having to go through and sell each one in an a la carte fashion. So it does a few things. Number one, it really simplifies the group sales process. It maximizes the savings for those employer groups. It really has a much faster ramp-up time because you're not doing a lot of customization. You're not really having to go back and forth from a negotiation perspective with those employer groups. And really a very important benefit to both the members within those groups as well as to the health plan is really driving some of that provider continuity that Jay mentioned a little bit earlier.
What have you found that could help health plans payment integrity leaders engage their employer groups?
Jay: So I can't stress enough the importance of a strong PI program within a plan. It's critical to plan success. It makes healthcare more affordable for everyone. So keeping medical cost down and members' premium down is again a primary role of a plan. Money saved on inappropriate medical spend can be spent other things that are relevant to the plan, whether it's wellness services or reducing premium dollars. Better healthcare contributes to better work-life balance. And it just improves satisfaction overall, especially with ASO groups where employers want their employees to be healthy and productive at their jobs. So avoiding any incorrect medical spend means less out-of-pocket costs for employees because copays are typically calculated on what is allowed, not what is billed. Allowing these types of PI programs to fully be engaged is critical to that employee's bottom dollar. Unfortunately, the American healthcare system is complicated. I know oftentimes I struggle with my own EOBs and coverage and copays, and consumers need to count on their healthcare partners to advocate on their behalf to avoid any sort of surprise balanced billing of members. And so this this is critical in my mind.
Allyn: The most frequent question that we get is, why should I pay more for a particular payment integrity or payment accuracy program that is not part of the standard offering that I get through my health plan? And we like to use the analogy—and it comes across very, very well because everybody is familiar with it—you have your primary care physician and you have a specialist. And when we are talking to these group sales folks and trying to help them understand the difference is, we say, you know, you have some sort of an illness or maybe just a preventive care visit, or perhaps your child needs a physical for playing sports at school, you go to your primary care physician for that. They can take care of 95–98% of any problem, any need that you have from an overall medical needs perspective.
That said, there are those 5% of the time, 3% of the time when you really need a specialist. It's something very complex. It's something that your primary care physician does not deal with on a daily basis. And so those are the types of things. And really, honestly, for the same reason why these program integrity vendors exist, that is they do something specialized that the health plan’s program and normal editing and clearinghouse edits don't do. Here at Cotiviti, we have been doing this for a very, very long time, for decades. And that is, we look for very complex scenarios. We look for very unique pricing arrangements on post-pay and contract compliance and a variety of other things that you can't do inside of the health plan or you may not be able to do certain things prepay, such as some of your contract compliance programs and your coordination of benefit programs. So there are a variety of different reasons why a payment accuracy program is important, and those are things that you really do want a specialist looking at to be able to really maximize those savings on behalf of the health plan and the employer group.
So partners like Cotiviti are going deeper and finding more and that provides more medical cost savings to the employer groups. Any more lessons on engaging groups with that value messaging?
Jay: I would add that adjudicating benefits pricing is different from as Allyn mentioned, the hundreds of payment rules that exist. I would often get feedback from my healthcare partners at the plan that we should not edit specific covered benefits. Whether it's behavioral health or EPSDT, you know, things that were of high value to the plan. I would counter that benefits still need to be billed appropriately. I like to use hysterectomies as an example because it crosses a lot of different criteria, whether it's age, gender, laterality, etc. So although it may be a covered benefit, it shouldn't be done on an infant, for example. it shouldn't be done on a biological male or billed with left, right, or bilateral modifiers. It shouldn't be billed more than once per lifetime. And so these are things that regardless of all the adjudication that a plan does, payment integrity is important to ensure that these types of scenarios don't increase cost for everyone. So you really have to separate the payment integrity function from the claims administrative services.
Once the groups are engaged, and especially when they're paying for payment integrity, they’re going to want to see the value they're receiving. How do we see our clients reporting value to their employer groups?
Allyn: Well Jay hit the nail on the head a little bit earlier in our conversation, and that is reporting is a very large component of really selling that value story. We heard that from numerous of our clients at the Cotiviti conference this year. And it really drove home the need for more reporting and more robust reporting to be able to facilitate those conversations. So having both summary and detail level reporting for the groups is obviously critical being able to break down where those savings are coming from. Being able to share what some of those medical cost categories are that are contributing to the savings and the medical expense overall has been an area that's been beneficial in helping to educate our health plan clients, and then in turn helping for them to communicate that value to the employer groups.
What lessons have we learned at implementing new payment integrity programs for health plans ASO business?
Allyn: I would say the very most important item to consider is your strategic vision. Be strategic, map it out. What is your multi-year plan? What is your end game in terms of deployment of these PI programs across your group? There are multiple vendors. There are multiple programs inside of a single vendor. Cotiviti, for example, has a whole suite of program integrity products to bring additional value at different intervention points for these employer groups. And so be strategic and really take your time to plan that out. It will over time really help the health plan realize those savings in a more cost-conscious way as well as being able to bring that value year-over-year to the employer groups. So for example looking at implementation, do your homework, do your mapping for all of your employer groups, even if you happen to be an opt-in approach to selling these programs to your employer groups.
What that means is you only have to map that data one time. and you don't have to open the hood of the car and continue to have to get in there and fiddle on a group-by-group basis every time some of your employer sales team goes out and sells these different programs. Map everything in upfront and make it configurable from a bypass perspective so that you can really limit those implementation costs. That's what we mean by being strategic and looking at that overall vision. Another one is consistency. We've talked about it a couple of times in this discussion, but really limit the modifications and customizations. It’s going to improve your overall administration costs associated with these programs, but it also is really important in terms of the provider experience. As Jay mentioned, the providers don't know whether a particular member presenting this health plan membership card is a fully insured member or an ASO member.
You really want their experience with those providers to be as consistent as possible. And one way to do that is to really limit the amount of customization in the different ways that these programs are administered between your fully insured book of business and your ASO business. And then you want to really pay attention to that expansion plan. You can certainly go “big bang” and do everything at once. Most of our clients don't do that. Obviously you have limitations on resources, on budget, and various things of that nature. And so you really want to look at the rollout plan and balance the complexity of an implementation, for example, with the value and the cost savings, and then be able to sort of phase things in over time to really build out that overall value proposition across the full suite of the different products and vendors that are in your ecosystem.
Jay: Having implemented several PI vendors on multiple platforms and lines of business I always tried to build for longevity. So what I would say is build once and deploy with flexibility. Give as much data as you can that allows vendors to make configurations on their end by bypassing groups or opt out or things like that. But having the data in-house allows us to still provide plans with very critical data to take back to their sales teams. When it comes time to re-contract, establish a point of claim. I think tying the savings directly to a claim is important for groups, so having that line level detail is important. And then finally, plan for the future. As I mentioned earlier, there's a lot of activity in moving a lot of postpay PI programs into prepay. So updating your data feed to accommodate future payment integrity programs like prepayment, DRG validation, prepayment coordination of benefits, or coding validation would be critical to ensuring that we're able to accommodate and make your investment last as long as possible.