How do health insurance carriers allocate their medical management resources? And do they always have their clients’ best interests at heart?
We tend to think of the benevolent aspects of medical management – caring nurses helping patients in distress find the best healthcare providers, effective treatments, answering their questions and relieving their fears. But we would be naive if we didn’t also recognize the financial purpose of medical management and, further, the role financial savings plays in how insurers allocate their medical management resources.
I’ve never come across a medical management nurse who, at their very core, didn’t want to help patients. I mean, that’s why they became nurses in the first place. Can you imagine a young girl dreaming, “I can’t wait to grow-up, become a nurse and limit insurance benefits for patients”?! It’s a preposterous thought.
However, insurance companies (even the non-profits) live and die by their medical loss ratios (claims versus premium). Too many claims and too little premium is a formula for bankruptcy.
So medical management exists on the premise that the right healthcare always costs the least (there are exceptions but certainly in the long-term, this tenet holds true). Medical management nurses and other clinicians are employed to help patients take care of themselves and navigate our incredibly complex healthcare delivery system. And these nurses succeed in nearly every patient engagement. Thank God for medical management nurses.
The problem today isn’t the nurses, it’s that there just aren’t enough of them. In our marketplace, for example, a major insurer has 300 nurses on staff (sounds like a lot, right?) but they’re trying to serve over 3 million members. That’s one (1) nurse for every 10,000 members! It’s impossible for them to reach all the members who need their support.
That being the case, the insurer needs to decide where to allocate their limited medical management resources. Here’s where it gets a little technical… The very largest claimants, most of whom, because of fully insured pooling or stop-loss insurance, are no longer impacting the employer’s claims experience or funding; consequently, the carrier’s medical management outcomes often benefit them more than the employer. For example, if an employer has a $100,000 pooling level (in a fully insured contract) or specific deductible (under a stop-loss contract), and the carrier’s medical management team reduces a claim from $250,000 to $175,000 (an achievable reduction given a skilled nurse doing the negotiating, etc.), that saved the insurer a whopping $75,000! But it didn’t save the employer a penny because the pooling point (or specific stop-loss) had already been breached.
Now let’s consider two (2) typical chronic disease-related claims: First, we have a non-compliant diabetic who is costing the healthplan $15,000 per year (that’s the national average – uncontrolled diabetics can cost $100,000 per year…). On the other hand, we have a compliant diabetic – he gets his Hemoglobin A1c checked, takes his medications as prescribed, watches what he eats, exercises and visits his doctor regularly. He’s not cheap – he costs the healthplan $3,300 per year – but that’s a lot better than $15,000. Unfortunately, the non-compliant diabetic may not be an attractive target for the carrier even though he is far more likely to suffer an exacerbation of his disease and become a high-cost claimant in future years. A savings potential of $12,000 may not even show-up on their radar. So, they’ll send the non-complaint patient periodic fliers such as “Managing Your Diabetes” (which will probably go right in the trash). A better carrier will have a nurse call the patient, but the extent of that conversation typically amounts to confirming that the patient knows all the things he’s supposed to be doing but isn’t. No meaningful progress is made.
Why are carriers okay with marginal medical management outcomes for claimants who are under the pooling level (or specific deductible)? Simple: If claims are higher than expected, they can raise rates their rates each and every renewal. Carriers only make a one-year commitment to the plan. Only the employer and the patient himself have a long-term interest in the health and well-being of the member. That’s a key observation worth remembering.
At the end of the day, the carrier gets to claim they have a “Diabetes Management Program” (they might even give it a corny name like “Diabete-Ease”…I just came-up with that…) and they may get to charge extra for it. But the employer and patient get little, if any, real benefit.
Consequently, the value of aggressive and persistent medical management is often greater for the employer than for the carrier. In order to prevent high claims in the future, it is essential for medical management to deploy all available resources to ensuring the compliance of members with chronic diseases.
How do you ensure that they are?