Transparent Healthcare 101

This is an edited transcript of a Q&A between Brian Hillier of HGRxPreferred and Dr. Lisa Faast of DiversifyRX, a pharmacy-owner’s guide to profitability. The conversation addresses a number of questions, like, “Do I have to wait to renew?” or “Do cheaper healthcare plans for my employees mean worse healthcare?”

What is HGRx Preferred?

HGRx Preferred is a consulting firm specializing in bringing contracts to small groups and large groups on employee benefits. They have partnered with a brokerage firm, Acrisure, which has over 550 offices throughout the U.S., to be able to roll this out. HGRx Preferred’s goal is to bring transparency to the market, especially on the pharmacy side.

When you say you're trying to bring transparency, what does that mean for you and HGRx?

Transparency may mean different things to different industries. We are tracking the dollars from the medical plan down to the pharmacy. The market's setup is through spread pricing: where the medical plan will pay Rate A, the pharmacy gets paid Rate B. And what happens between A and B is a gray spot. There are many rebates, different pricing, GPOs, and third parties.

With HGRx Preferred, if someone is taking a $4,000 drug, we want to be able to show what the actual cost of that drug is, including rebates and discounts. We want to be able to track the whole dollar, so that the group gets credit as well as on the pharmacy side. The pharmacy does not end up being the bad person charging the high rate when, at the end of the day, that's not what they're being paid or making.

What’s changed in the last few years with health insurance that's kind of brought us to where we are today?

The most significant changes in our industry are the regulations set forth. The biggest is healthcare reform which developed community rates also know as age banded rates.  However, the industry is starting to reward healthier risks. It's finding ways to write policies outside of age banded rates. And there are opportunities out there to offer programs that do not follow the age banded rates. This is what we have done with our product through HGRx Preferred: We underwrite the risk and provide a rate to reward the group with a rate that their risk deserves.

Every group does not qualify. We typically see about 60% to 70% of groups qualify. If, for some reason, there is a risk that the underwriters don't like, it will make sense for the group to stay on their age-banded product because they're not up for that risk. And when you're talking about risk in this instance, you're talking about the health of the group. Typically, independent pharmacy owners and their employees tend to be a healthier bunch.

So what you're saying is by banding together and screening very upfront for the healthiness of the group, you're determining whether or not they qualify — and letting people who have lower risk or better health into this group to save.

You're exactly right. There's the 80/20 saying: 80% of the cost is made up by 20% of the individuals. What that means is that majority of members are not utilizing their benefits. It's only 20% of the members. So when you start to add in dialysis, cancer treatment, and the hemophiliacs, that’s what's driving the premium. It's not the diabetics, or the routine exams, or the small surgeries. It's these ongoing infusions, dialysis and drugs that are driving up the cost.

By going through the underwriting process upfront, we do pre-screen just to make sure that we're not spending a pharmacy's time or our time. We want to be respectful of everybody's schedule. So we do review that upfront to make sure that they'll be a good fit for the program.

What kind of savings are we talking about here? What is that dollar value? And can it be done in the next 90 days?

Ultimately, what a pharmacy is looking at is, "What is my bottom line?" And one way would be to grow revenues. Another way is to control expenses. At the end of the day, what you're trying to do is look at the bottom line and say, "This is how successful I am." If you're doing a million dollars of revenue and have $900,000 of expenses, that's the same as doing $10 million of revenue and having $9.9 million of expenses. At the end of the day, you're only making a hundred thousand.

So really this topic is the expenses on the management side. How do we control the amount that we're paying towards insurance? How do we control that expense to help the bottom line? And what I would say is for those who qualify, generally, we see 18% to 28%. I do give a wide range. We’ve seen some come in closer to 9% or 10%, and we've seen some come in almost 30%, 40%. But I would say right around that 20% range of total premium.

And that becomes a couple of different things. Number one, we are looking for those groups that are overpaying because of the age banded rates and putting them into a model. The second thing is transparency. When we can track the money and where it's going, it allows us to negotiate. When you just get handed your renewal, and it says, "Here's a 9%," you have no idea of how the pool ran or how the insurance company ran. Visibility equals savings.

It not only could save the pharmacy owner money, but if employees are opting for family coverage, it also saves on what the employee pays, right?

That's correct. On total premium, it's about 20%. If they do a split with the employee, that could be split both ways. It could all go towards the employee, where the employer pays the same amount that they paid in the past dollar-wise. Not percentage-wise, but dollar-wise. They could get the entire savings to go to their employees. Or they could adjust it where the savings are hitting their bottom line because they can adjust it to the portion that they're paying. If they pay 70% of all tiers or 50% of the single, they're going to realize the savings in their bottom line as well.

Is the insurance cheaper because it's bad insurance?

HGRx Preferred is partnered with Acrisure. And they have access to the entire market. So whether it be Blue Cross, United, Cigna, Aetna... We look at all the insurances. We are not looking to reduce benefits. We’re trying to advertise that there is a transparent model available that they have helped put together. So it is still going to be comprehensive insurance. It still uses one of the big names, whether that be Aetna or whoever it may be. But it is not about reducing providers. It's not about cutting benefits. It's more about the model of how it's being put together.

How long do I have to wait if I just renewed?

The quick answer is that they do not have to wait. The majority of the plans that are out there, especially those age banded plans, are month-to-month. There are some policies that are not month-to-month when you get into the larger group, which are often 50 to 100 employees or larger. Those are the ones that we'll want to look at and see what timing makes the most sense. But for companies with less than 50 employees, it's something that we could look at immediately.

One of the biggest questions is, "Well, what about my employees who have already paid some deductible or out-of-pocket?" If they're calendar-year or policy-year, we take the amount that the member has satisfied and put it towards the new policy, and we can keep it calendar-year. So it's not going to harm the employees. There's no sense in waiting. At the end of the day, all it does is it just gets the savings earlier if we look at it sooner than later.

How many employees do I need to have to participate?

That's really where the HGRx Preferred comes into play. HGRx Preferred is not the insurance company. The insurance company is Aetna. And then we use Rx Preferred for the prescription side. And because of what HGRx Preferred has put together, they allow us to go down to two employees. We're leveraging the negotiation of large numbers. But at the end of the day, we do issue individual policies and we go down to two employees.

What about doctors in-network? Are my employees going to be able to keep the same doctor, or will they have to figure that out?

Yes. The big players are Blue Cross, United, Cigna, Aetna. B-U-C-A. We call them the BUCA carriers.

And while in a specific area there could be slight differences, generally speaking across the board, the overlap is about 97%. So when we do look at the hospitals, or we look at the doctors, we know nationwide, they overlap about 97%. What we have to do is we have to drill down to that specific location. And really what we're making sure of is that the local doctor or the local hospital is one of that 97%. Obviously, we don't want to have them be dissatisfied with the program to save money. It's about keeping the doctors. It's about keeping good benefits. The savings come by changing the way that the policy is being constructed—instead of the age banded rates, having it be a transparent policy. That is where the savings come from.

But what if something catastrophic happens? One of my employees has a premature baby? Or somebody gets really sick?

Healthcare reform actually came in and removed all of the annual maximums for plans that are going to be considered comprehensive coverage or credible coverage. So on all of the policies, there's an unlimited maximum for those types of things. So where before, prior to 2014, you may have a million-dollar maximum or a half a million-dollar maximum on your program. Those have been removed.

So if someone has a preemie baby and that baby’s treatment costs $1.3 million, that is the risk of the carrier. So that is the way that we have to write the policies. It's a mandate. And so those catastrophic claims, they're going to be covered under the policy accordingly.

I don't know if my pharmacy would qualify. What does the process look like?

If an employer wants to start the process of looking into this, what we have to do is just gather some initial information. And that is standard information across the board, regardless of going out to the market. If you're going to do it through us, or through another broker, or look at different options, we have to start with a census, the summary of benefits, and the rates.

The census allows us to see the ages and what type of members are signing up. It allows us to see if a spouse is older or younger than the employee. The summary of benefits is obvious. We want to quote apples to apples. We don't want to come in and provide savings by quoting a high deductible if they have a low deductible plan. We want to make a side-by-side comparison. So there is some basic information that we're going to need in order to review it.

Before we get the employees all riled up and tell them, “We're making changes,” really it's just about having the conversation with that employer. What are they doing? How many employees? What's their census mix? Are they currently age banded? If they are age banded, and they've already entered into a program, how long have they been in that program? Have they been able to see their experience? How has it run? So really, it's just about getting some initial data and having that conversation with the employer group to make sure that it's going to be worth everyone's time, including theirs, to move forward.

What is the overall timeline? Can somebody switch plans and get started in 90 days? How long does this whole process take?

If I were to paint a typical timeline, it takes an employer about a week to gather the information. It should only take them about 30 minutes.

From the bid standpoint or the underwriting standpoint, it takes another week. It takes the carriers about five to seven business days to review the data. They may have a couple of questions. They may come back and just get some clarification on something.

Then for the install, generally speaking, we like to have two weeks for the install. So once the group makes the decision and says, "Yes, there are significant savings. We want to move forward," that installation takes about two weeks. And that's to make sure that Member ID cards show up on time and they are in their hands. So I would say on average, it takes about four weeks from beginning to end.

With that said, if an employer gets us the information in a day, we underwrite it, it takes a week, and they say, "Hey, as long as I have coverage, I don't care if they have a plastic card in their hand." Yeah, we can do this in seven, eight days. But generally speaking, it's about a four-week process from beginning to end till they actually realize the savings on their bill.

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