Monday, 06 June 2016 06:26

How Healthcare Provider Organizations Manage Their Self-Funded Employee Health Plans

Written by Valence Health

Executive Summary

As the healthcare delivery network continues to evolve from volume-to-value, healthcare providers are paying ever more attention to the health and cost of a population close to home—their own employees.

Value-based care is predicated upon aligning incentives amongst all stakeholders: providers, payors, patients and employers. In the case of employee health plans, hospitals, health systems and other healthcare delivery organizations actually play three of those four key stakeholders. They are simultaneously the payor, the employer and the primary provider of healthcare services. This reality creates a set of unique challenges and opportunities. In fact, many provider organizations are using their self-funded plans and their employees as learning laboratories for value-based care, exploring issues such as network structure, benefit design, patient responses to wellness and care management programs, provider responses to clinical coordination across the care continuum, and the critical search for cost reduction.

To explore these and other questions, as well as establishing a baseline understanding of how provider organizations manage their employee health plans today, Valence Health, in conjunction with the American Society for Healthcare Human Resources Administration (ASHHRA), conducted a recent national survey of more than 150 healthcare organizations.

Among the survey’s key findings were:

Human resources and finance executives continue to turn their attention to bringing employee health plans in line with other value-based endeavors focused on patient populations. Respondents listed narrow networks, domestic utilization and medical management as key concerns to align costs and outcomes.

As expected, over 75% of respondents self-insure their employees’ healthcare. Of those that do not currently self-insure their employees’ health, 25% indicate it is somewhat or very likely that they will switch to a self- insured approach next year.

Of those who self-insure their employees, 54% looked to a traditional payor to administer their self-insured plan, while 36% look to an independent third-party administrator (TPA). Interestingly, those working with independent TPAs were significantly more satisfied, with 50% of those respondents being very satisfied, compared to just 34% who were very satisfied using a payor for administration.

Cost remains the number one driver for healthcare providers when selecting an administrative partner for their self-funded plan.

When evaluating their administrative partners, provider organizations are least satisfied with medical management services.


Healthcare providers are using their employees to explore multiple aspects of value-based care

When asked an open-ended question regarding what challenges or opportunities they would like to learn more about in relation to their self-funded employee health plan, respondents hit on all four aspects of value-based care: Wellness and patient engagement (20.4%); utilization and site selection (18.5%); cost (14.8%); and plan design (13.0%). It is clear that providers are thinking about not only optimizing their employee plan, but also how to leverage the learning and infrastructure from the employee plan to serve their broader patient populations under value-based models. 

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The vast majority of provider organizations provide health insurance via a self-funded plan

Like most organizations with more than 500 employees, the majority of the provider organizations surveyed self-insure their employee base. Fully 77% of all respondents indicated that they bear the financial responsibility for the healthcare provided to their employees. Providers employ a variety of risk management strategies to minimize their financial exposure, with the major levers being domestic utilization and well-designed stop-loss insurance. The former ensures that providers really only bear the marginal cost of incremental care delivered within their network, versus the full charged costs of outside network care. The latter can be designed to alleviate the actuarial risk that providers feel is beyond their balance sheet to support.

Reflecting a larger trend across all employers, it appears that a significant portion of healthcare provider organizations who are not currently self-insured for their employees’ health are moving to do so. A quarter of all respondents not yet self- insured think it is somewhat or very likely that they will switch to that approach next year. 

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Not as many providers look to traditional payors for administrative services as anticipated

In a surprising finding, the survey revealed that the number of providers who looked to traditional payors (e.g. Blue Cross/ Blue Shield plans, Aetna, Cigna, UnitedHealthcare) for administrative assistance to support their plans was much less than expected. Only 54% of respondents partner with such organizations. Historically, traditional payors have used adjustments to their commercial reimbursement rates as incentives for a hospital to select them as the administrator of the self-insured plan. When combined with satisfaction ratings indicating that those providers working with independent TPAs were significantly more satisfied than those working for payors, the possibility arises that providers may be recognizing that controlling their own destiny is more important, and ultimately more valuable, than any incentives traditional payors might provide. 

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The vast majority of respondents indicated that they review their plan administration partners every two or three years, and that cost remains a key driver

Underscoring the rapidly evolving nature of value-based care, provider organizations indicated that they regularly review their administrative partners and approach to employee health insurance. Five percent of respondents review their approach annually, 43% every two years, and 28% every three years. When they do look to choose a new approach or partner, cost is still “king”—as 59% of respondents said administrative cost was the most important decision factor. 

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When considering the performance of various administrative functions, medical management received the lowest rating, while the ability to drive in-network utilization received the highest rating

Just as overall satisfaction saw respondents more favorable towards independent TPA partners, a breakdown of individual functions saw independent TPAs more highly-rated on five of seven key functions. Interestingly though, medical management, which is core to value-based care efforts, was clearly identified as the area with the least satisfaction. Perhaps this indicates that providers, as those directly responsible for delivering and coordinating care, set a high bar for partners in this area. By contrast, the ability to help drive in-network utilization was well-rated, regardless of how the plan was administered. 

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Survey Methodology

This online survey was sponsored by Valence Health and ASHHRA, and took place in Q1 2016. In total there were 185 partial and complete responses. Respondents were primarily HR executives, together with some financial executives. All respondents were from US-based provider organizations. 


About ASHHRA Founded in 1964, the American Society for Healthcare Human Resources Administration (ASHHRA) is a personal membership group of the American Hospital Association (AHA) and has more than 3100 members nationwide. ASHHRA leads the way for members to become more effective, valued, and credible leaders in health care human resources. As the foremost authority in health care human resources, ASHHRA provides timely and critical support through research, learning and knowledge sharing, professional development, products and resources, and provides opportunities for networking and collaboration. ASHHRA offers the only certification distinguishing health care human resource professionals, the Certified in Healthcare Human Resources (CHHR). Visit for more information.

About Valence Health

Valence Health provides value-based solutions for hospitals, health systems and physicians to help them achieve clinical and financial rewards for more effectively managing patient populations. Leveraging 20 years of experience, Valence Health works with clients to design, build and manage customized value-based models including clinically integrated networks, bundled payments, risk-based contracts, accountable care organizations and provider-sponsored health plans. Providers turn to Valence Health’s integrated set of advisory services, population health technology and value-based services to make the volume-to-value transition with a single partner in a practical and flexible way. Valence Health’s more than 900 employees empower 85,000 physicians and 135 hospitals to advance the health of 20 million patients. For more information, visit 

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Last modified on Wednesday, 08 June 2016 16:39