Is your self-insured plan headed for catastrophe? | Brian Ko

Leaders posit that truly successful organizations operate more like close-knit communities or large families than merely transactional enterprises.

While work is distinctly different from personal life, the parallels are striking. To Richard Branson, the workplace can feel like home, because colleagues “take care of each other.” To organizational psychologist Adam Grant, fostering a sense of community within the workplace is so important because, at work “people feel a sense of belonging.”

For many leaders, the benefits package is a way to extend this sense of belonging and care to every employee. This is evidenced in no small part by the rise in self-insured employers.

Brian Ko

As of 2021, 64% of Americans were covered by self-funded plans. Yet, the rising costs of healthcare coverage are proving difficult for many self-insured employers, such as health systems and even health plans, to stomach. Last year, organizations such as these faced the largest annual jump in benefit costs in over a decade: an average per-employee increase of 6.3%.

Self-insuring allows the flexibility to design individually-tailored plans for organizations and avoid unnecessary expenses, yet there are certain inevitable scenarios that can ruin even the most beautifully planned budget.

For those catastrophic costs, stop-loss insurance can be a CFO’s best friend. With stop-loss policies, insurers are liable for costs that exceed a certain limit, such as a catastrophic health event.

In no area are costs more variable than in complex care. For example, episodes related to neonatal infant care are disproportionately costly, accounting for 25% of all stop-loss claims of $1 million or more.

To make up for “lost time” during the pandemic, experts are forecasting a mini baby-boom, making now the ideal time to reexamine your organization’s policies related to catastrophic care. In order to mitigate costs and support employee populations, organizations must adopt targeted strategies related to maternity and NICU care to help prevent and expertly manage complex care episodes.

Stop-loss as last resort

While stop-loss coverage supports organizations during these unexpected and catastrophic events, there are complex care episodes that accumulate over the course of the year, resulting in numerous high-cost claims.

Combined, these costs can ruin the most carefully planned budget; yet, individually, they fail to trigger the stop-loss coverage. For CFOs constantly balancing risk versus reward, these episodes keep us up at night.

Of all unexpected claims, those related to complex deliveries – or premature and medically complex births – can add up the quickest.

With millions of deliveries each year, these high-cost events are more common than may be expected: 9.8% of all births are premature, and 10-15% of all babies born require a stay in the NICU. At an average cost of $3,500 per day, the total cost for a NICU stay can total upwards of $1 million.

Invariably, whether it be the high threshold or the startling annual increases, self-insured organizations must realize that stop-loss is less a long-term solution than a last resort. While it will always be important to keep these policies in place, instead of relying on stop-loss to protect your organization’s financial health, it is imperative to adopt proactive, preventative solutions that help prevent catastrophe from occurring in the first place.

The case for care management

Maternal and infant care is a holistic continuum – one impacted by a diverse set of factors such as nutrition, social determinants of health, mental health, and chronic and pre-existing conditions.

Ideally, care management should begin at conception and continue through to at least one year postpartum. To truly support expecting employees, while safeguarding your organization’s future, CFOs need to consider solutions that offer both end-to-end maternal and NICU care management services to proactively help prevent catastrophic care episodes.

By covering the entire pregnancy journey, solutions such as these can offer employers greater peace of mind.

For example, care managers can begin to identify opportunities that improve an expectant mother’s health and develop care plans to address potential complications. In this way, early support and intervention can at times prevent costly episodes before they’re incurred, including emergency services, and unnecessary readmissions. They can even achieve a reduction in complex care utilization.

Yet, once an inevitable complication arises, agile solutions should be in place to shift gears from prevention to ensuring that care received is medically necessary and accurately coded, both for cost containment and efficient claims cycle management.

Catastrophe is avoidable

CFOs must now look beyond basic cost containment measures and stop-loss coverage to implement targeted, proactive solutions that help manage and address the episodes that eventually necessitate costly, complex care.

While stop-loss policies are in place for those rare – yet catastrophic – outlier episodes, targeted solutions are required for the other cases that fall somewhere in between.

These comprehensive solutions actively work to improve overall care management and help improve both employee health and your organization’s budget. In so doing, they help prevent those worse case scenarios from ever arising.

Comprehensive maternal and NICU care solutions have become necessary to support and protect the financial health of organizations - along with the physical and financial health of every employee.

When the inevitable emergency arises, these solutions act to reduce costs and better support employees and their families. Financial catastrophe is often avoidable for those CFOs who properly plan and prepare.

Brian Ko is the chief financial officer for ProgenyHealth, a provider of comprehensive maternity care management and NICU care management for premature and medically complex newborns.