Are employer-built health plans one of the best kept secrets in insurance? 

An employer-built health plan. It may not be a concept you've ever heard of, but those that build and use them will tell you they're the best kept secret in the world of health insurance. Becker's decided to explore more about these custom plans that promise to cut out commercial payers altogether and greatly reduce employers' annual expenses on employee health benefits.

Cristy Gupton is the president of Custom Benefits Solutions, a Morganton, N.C.-based company that assists private employers with building custom-built health plans for their employees. She spoke with Becker's about how these insurance-free plans contract directly with providers.

"I don't want employers to think that they themselves, by themselves, have to build it themselves. That's where we come in," Ms. Gupton said.

Ms. Gupton, who has been in the industry for more than two decades, touts the transparency that comes under these custom plans and the rate negotiations between payers and providers that they don't include. 

"You can see if the pharmacy benefits manager owes you a rebate on a name-brand drug because it's right there for everyone to see. You know that you can get a better cash price on a procedure and you have all of the autonomy in the world to strike a direct contract with that provider," she said.

It's not difficult to understand why employers may be interested in ditching their commercial insurance — not to mention the lack of premiums, copays or deductibles. Employers themselves never negotiate with providers or become involved with individual employee benefits.

A Florida auto mall owner said no more to Blue Cross Blue Shield and Aetna in April and says he is saving 20 percent to 60 percent on employee health benefits, depending on the service. His plan offers employees an on-site physician every two weeks with no appointment needed. Employees receive 30 to 60 minute appointments and 24/7 physician access. The plan also includes a service called "nurse navigator," where employees can be directed to a specialist if the contracted physician can't address a specific issue.

Custom Benefits Solutions is a part of Atlanta-based Mitigate Partners, an employee benefits consulting group of 29 firms like Ms. Gupton's. Their clients include large public school districts, unions and hospitals, though these custom plans can be created for any employer, regardless of their total number of employees.

One of Mitigate's clients is DeSoto Memorial Hospital, a small 49 bed hospital in Arcadia, Fla. DeSoto previously had a self-funded plan with a major payer that cost them over $2 million annually. After contracting with Mitigate, their first year expenses were slashed by $1.2 million, or 54 percent.

"Direct primary care is a growing trend. It's a way to use affordable, mutually beneficial cash payments to just buy an exclusive arrangement between your employees and physicians," Ms. Gupton said. "I tell employees, this is your personal physician on speed dial. And the light bulbs just go on in the employee's minds. They say, 'Okay, this is different. This is better.'"

The U.S. Labor Department requires all funds paid into a self-funded plan to be separated into a trust account and a plan document to lay out all available benefits. Custom plans are only required to pay reasonable expenses. If an employee needs or wants an expensive drug or service, a process to determine if that service is "reasonable" under the plan document will take place.

So what's the catch? Why doesn't everyone have an employer-built health plan?

One benefit to holding a policy with a commercial insurance company is that they have the bargaining power to extract discounts from hospital systems and physician groups that a smaller organization likely does not, according to Igor Belokrinitsky.

Mr. Belokrinitsky is an adviser to executives in the healthcare industry for Strategy&, a global consulting firm. He spoke with Becker's and pointed out that another benefit to commercial payers is their ability to assess risk.

"Health insurance companies employ a lot of actuaries," he said. "They can look at a population and a given employer and have reasonably good predictions about how many are going to get sick, how many are going to get cancer, what's the right pricing model to put on the rest of that population and how much reinsurance to get to protect yourself from downside in the bad cases." 

The third major benefit Mr. Belokrinitsky highlighted is the fact that modern payers employ a lot of physicians and nurses to conduct care management, with the goal of getting better health outcomes for members.

"Anything that creates competition and pushes the behemoths, the incumbents and the dinosaurs to move a little bit faster, I think is very useful," Mr. Belokrinitsky said. "I think time will tell whether these employer deals are by themselves intrinsically better than the traditional health insurance setup. Or are they merely a disrupter that pushes the industry in a particular direction without necessarily being financially viable itself?"

Still, employers nationwide ranging from big to small have taken steps to take control of their health benefits.

Walmart, for example, contracts directly with health systems it believes has demonstrated high-quality care and outcomes through its Centers of Excellence program. Those providers are where Walmart will send its employees directly for defined episodes of care, and then reimburse them through bundled payments.

For Ms. Gupton, she believes a little faith is all employers need to break out of the traditional insurance model.

"We would never want to cheapen something just to make it cost less at the expense of patient care. In our dynamic, we believe better care and better outcomes can certainly be paid for with less money compared to the insurer-built plans," she said. "All it takes is a good adviser and a little courage, because sometimes change takes courage."

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