Self-funding is the most powerful technique available to employers who want to minimize the cost of employee medical benefits, while still delivering meaningful benefits to their people.  Yet the act of becoming self-funded does not automatically shield the employer or the participating employees from unnecessary costs being charged against plan assets.  By its very design the health care delivery system, as it is generally accessed through carrier driven or independent “networks”, contains multiple practices that can work to increase costs without providing any improved value in outcomes.  In most cases these unnecessary costs will exceed 10% of the total expenditures of health plans.  Today that represents amounts in excess of $1,000.00 per employee per year.  For every 1,000 employees that’s $1,000,000.00 that could have fallen to the employer’s bottom line or been used to maintain richer benefits or lower employee contribution costs.  In any event it is too much money to turn away from without investigating the actual opportunities there are for savings.

Some of the key areas that contain these costs are:

  • Utilization of hospital based out-patient facilities for out-patient elective surgeries
  • Utilization of hospital based imaging and scanning facilities for elective testing
  • Utilization of hospital based laboratories for wellness plan biometrics or out-patient diagnostic blood work
  • Excessive hospital admissions recommended by providers manning the ER or other hospital based facilities who are employees of the hospital
  • Prescription Drug Management contracts that contain provisions that do not work to drive the very lowest costs to the plan
  • Catastrophic care delivered in a fee for service environment that could be delivered at less expensive case rates at Centers of Excellence
  • Network “discounts” that reimburse providers with amounts far in excess of actual cost
  • Care management / Wellness initiatives that cannot document meaningful Return On Investment


The traditional “benefits” industry has, for too long, pushed the focus on cost management on reductions in the benefits afforded to the covered people while ignoring the structural issues that have arisen over time that drive increased costs without any additional value to the employer or the covered people.  The United States is the most expensive health care system in the developed world yet the industry itself admits that quality is lagging versus many of the other developed countries.   It is clear that in addition to these types of cost problems the health and wellness of the population is also a major contributor to excessive care delivery and cost.  many employers have been or are engaging in Population Health Management strategies to attempt to address the problem, but few are looking at the other issues listed above.  Employers need to stand up for their health plans and their people and demand that in exchange for all the money they are spending on health benefits that they see value in the form of healthier people.

The Innovation Programs, LLC  Plan Asset Protection Program is designed to give the employer the information, data and strategic direction needed to remove unnecessary costs wherever they may be found.  The recommended course of action is as follows:

  • Contract with a data warehouse that can integrate all the data available in regard to the eligible people – medical claims, Rx claims, Provider Electronic Health Records where possible, on-site clinic or occupational care services, workers compensation, wellness participation, lab values from biometrics, absence data from payroll, disability claims data, etc.
  • Analyze the data to isolate specific areas of excess cost and health risk
  • Set plan goals for cost reduction
  • Take appropriate steps to engage programs that will deliver the savings and guarantee their performance
  • Convene a Vendors Summit to set responsibilities, elicit support and secure buy-in and  from all parties to achieve the goals
  • Monitor performance monthly with reports to plan mangers documenting results
  • Use the data warehouse to analyze and document Return On Investment for each cost saving effort