Employers to Health Care Vendors: Integrate

One more reason why its not so simple simplifying health care:

A typical large employer doesn't just contract with a single health plan or single administrator if they are self-insured, to serve their employee population. They contract with several health plans, even often in addition to their own self-funded plan, thus providing options available to employees during an open enrollment period. But contracting with health care related vendors doesn't stop there for many large employers. They also might directly contract for wellness programs, employee assistance programs, disease management, health risk assessment, on-site clinics, health savings accounts, health reimbursement accounts, flexible spending accounts, or separate "carved-out" prescription benefit, behavioral, chiropractic or other specialty service programs. They might direct contract with additional provider networks. They retain health benefit consulting and actuarial firms to advise and provide administrative services.

Of course a health plan could provide, or sub-contract most of these services, which would simplify things, but large employers often don't want all their eggs in one basket. If they switch plans, they want continuity with these other programs. Furthermore, because they often offer multiple plans, they want to standardize these other programs under one vendor. Also, many large employers have at least a portion of their employees covered under a self-insured arrangement, and they employer has to outsource these programs for at least their self-funded population. Lastly, many employer benefit managers simply want more direct control over these services.

So, large employer based coverage involves a complex web of vendors that often aren't that compatible in how their transact. Employers are stepping up the pressure on their vendors to integrate according to employer specifications. Michael Garrett of the International Foundation of Employee Benefit Plans has written an article in the upcoming December 2007 issue of Benefits & Compensation Digest, "Health Care Summits Promote Integration of Services." in which he reports on various large employers proactively holding Summits with their vendors in this regard. For example, he cites an Intel Summit just held, where their stated objective is to "establish or improve supplier integration and seamless service for the company's employees."

The article is available at: http://www.ifebp.org/pdf/webexclusive/07dec.pdf

It is true employers have fueled this problem by contracting with a multitude of vendors as opposed to consolidating certain services. However, while consolidation reduces the number of players that need to integrate, it also reduces the choices available to employers and employees, and can reduce competition. There is also not a plethora of turn-key providers that can perform all these services. Thus most large employers prefer integrating to complete consolidation.

But the more pressure to integrate, the better, so here's to more employers "Summiting Away" with their vendors.