The focus is on the optimal approach in providing an attractive benefits program for the employees and their dependents with plan designs, plan options, networks of hospitals, physicians and pharmacies and the most cost effective financing of medical and prescription drugs.
Employer-paid premiums for health insurance coverage are exempt from federal income and payroll taxes and this tax subsidy is at the core of why the employer-based system will continue to be the preferred mode of providing health insurance coverage in the US. The pressure to attract and retain employees compels the employer to provide this coverage and to do so cost effectively.
The focus is managing productivity within the context of the various plans such as short and long term disability, paid time off and extended illness banks, etc., with a return to work approach that manages the episodes and adopts processes designed to avoid the compliance traps.
The Family Medical Leave Act (FMLA) requires employers to provide notices, layout employee expectations, select leave counting methods, etc. The Americans with Disabilities Act (ADAAA) has its own procedural requirements with extension of leave requests, medical examinations, essential job functions, employer accommodations, financial realities, "undue hardship", etc.
Evidence based medicine guidelines are used to direct the practitioner to best outcomes. The role of finance in this clinical aspect is to perform those calculations that determine the cost impact in the episodes of care, settings of care and cost effectiveness.
The per member per year (PMPY) cost is a core calculation, but other calculations are used such as average length of stay (ALOS), admits per 1,000, medicine possession ratios, inpatient readmission rates, physician compliance percentages with treatment protocols, levels of employee engagement, etc., all necessary in evaluating total cost (P x Q) with the focus on developing a strategy.
The material for consideration includes fully insured contracts, administrative services only (ASO) with/without stop loss and advise to pay arrangements. Stop loss, multinational pooling and captives (single parent or protected cell) are additional areas of expertise.
The elements of risk and reward are used to stop the "leakage" in the forms of overpayment of premium or over transference of risk. The negotiated arrangement is to eliminate penalties for the financing of frequency risks with insurance contracts and to prevent diminishing marginal utility where there is too much risk assumption relative to the value in transferring severity risks.