One tricky way vendors show 'savings' that never materialize

Here's something for benefit advisers to ponder as another open-enrollment season winds to a close and a fresh calendar year offers opportunities to vet new vendors: If employee health and wellness programs actually save the money they claim to save, then why are health plan costs still going up? 

Price-Waterhouse Coopers estimates that health premiums will grow 8% in 2025; Mercer says 6%. And that's a percentage of the highest dollar amount ever paid for health insurance. Yet you'd never know any of this based on all the boasting being bandied about in the marketplace.

It makes a reasonable person suspect that some (perhaps most!) programs are fabricating savings. This becomes a real concern for industry consultants who, along with their employer clients, have become overwhelmed by the number of point solutions crowding the market. And with pressure mounting across the benefits landscape to fulfill fiduciary responsibilities and be better stewards for plan participants, there are lessons to be learned from attempts to trick plan sponsors with hollow promises of savings that never materialize. 

Read more:  Another year, higher healthcare prices: Are employers ready for 2025?

Here's one popular way to create savings out of thin air: use per-case or per-patient dollars. This works especially well with common illnesses such as back pain. Here's an example of a program's estimated savings: 

Program's Up Front Savings Estimate 

• No change in number of cases
• Save 60%

With such great savings, the plan should give members an incentive to use the new program. The problem is that lowering financial barriers brings more patients into care – mainly people whose symptoms were so mild that they did not seek care earlier. As more people become cases, the health plan spends more. 

Program's Impact on # of Cases and Costs 

• Cases go up when copay is lowered
• Save 0%

Read more:  Will the Affordable Care Act survive a Trump presidency?

Even so, the program will show savings by theorizing that the new cases would have cost as much as the old ones. This is not a reasonable assumption, since new cases are largely people whose symptoms were so mild that they did not seek care.  The final result is that the plan spent as much or more on the illness as before; that it might have spent more does not make it savings.

Program's Fabricated Savings 

• Save 66%

The bottom line is by using per-case rates, a vendor can convince a plan that it saved money when it did not. Programs that entice people by waiving the copay are especially likely to lead to more spending, not less. To all benefit brokers and advisers serving the health and welfare benefits space, remember to always embrace this simple rule when working on behalf of clients – especially now when the stakes on benefit design have never been higher.