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Why Payers Like Defined Contribution Programs

 |  By Margaret@example.com  
   September 06, 2013

 

Low administrative costs and the capability to compete with public health insurance exchanges are driving factors. So is the promise of access to big data, which can give payers a strategic edge.

 

Change keeps on coming to the health insurance industry.

Pittsburgh-based Highmark Health Services is in the process of expanding its defined contribution products to large group employers. The expansion follows a successful year-long pilot with small group employers (fewer than 100 employees) that attracted 60 companies and about 6,000 covered lives, says Bill Brown, manager of digital distribution for the giant Blue Cross Blue Shield affiliate.

In January, Highmark made the product line available to employers with more than 100 employees. Now it is marketing to large employer groups (more than 1,000 employees).

To date it has enrolled around 100 companies with about 9,200 covered lives.

In January 2014, Highmark will add its defined contribution product line to its Delaware and West Virginia markets. The products are offered though Highmark's proprietary health insurance exchange, MyBenefits.

For employers, defined contribution plans take the guesswork out of budgeting for healthcare costs from year-to-year. An employer puts a cap on how much to spend on employee healthcare benefits. Each employee receives a set amount of money to spend on the exchange to purchase the health benefits that meet his or her needs.

Among the advantages to Highmark is administrative efficiency. Brown notes that in western Pennsylvania a lot of Highmark's small group business was paper-based and took some time to manage. The platform in place for defined contribution is entirely electronic for processes such as open enrollment and enrollment updates.

"Once we input the group information onto the platform we can provide the group administrators with enrollment and payroll reduction reports. An administrator can download a member census whenever they need one. To not have to worry about pushing paperwork saves a lot of time and effort," says Brown.

Highmark began exploring the market for defined contribution just as healthcare reform came onto the scene. Brown, who was in new product development at the time, says the team looked at new and expansion products that would be healthcare reform compliant.

Business retention, especially in terms of competing with the public HIX, was a driving factor.

Offering defined contribution through its own private, proprietary HIX filled the bill.

Highmark decided to pilot with small groups so insurance brokers could be part of the process. About 99% of Highmark's small group business is sold through brokers and the insurer wanted to maintain that buffer with clients as it worked through the operations side of the HIX. The pilot began with one broker and then added five.

BCBS's Brown says the buzz about private HIX and defined contribution plans has exploded over the past six to eight months as employers have become more aggressive in seeking out new ways to reduce their employee healthcare costs. He says Highmark's decision to expand from 100-member employer groups to 1,000-member groups simply reflects market demand.

More than 14% of the groups selecting defined contribution products are new to Highmark. Buy ups of ancillary products such as dental and vision to existing customers nearly doubled. Previously those products were not always available to small groups, Brown says.

But it is access to so-called "big data" that makes the strategic difference. "We get tons of information from the employees who are shopping on the platform," says Brown. Highmark also gathers information from surveys about the product selection and the employer contribution.

Recently Highmark revamped the platform's user experience based on survey feedback from administrators and employees. One change: adding an employee sign-in before reviewing products. Employees preferred to sign-in so they could save their work as they moved around the platform and then come back to it later. Decision support tools to help in product selection were also added.

The Highmark platform was developed by Seattle-based Array Health. Last month Highmark announced that it is expanding its strategic relationship with Array and investing in the company to enable "more businesses in more locations" to access its defined contribution products.

Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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