Case Study Friday!
Helping a Midwest Employer Save Over a Million in 12 Months
Company Size: 300 employees
Location: Midwest United States
Industry: Manufacturing
Challenge: The employer was facing escalating healthcare and pharmacy benefit costs that were threatening their bottom line. They needed a comprehensive solution that would reduce expenses, improve transparency, and enhance employee health outcomes.
The Challenge: The employer was dealing with large annual increases in reinsurance rates, high pharmacy costs, and inefficiencies in their existing benefit programs. Despite paying significant premiums, the company was not seeing the expected returns in terms of savings or improved employee health outcomes. The challenge was clear: they needed a more strategic, transparent approach to healthcare that would align costs with outcomes.
The ECO’s Solution: The ECO’s team took a multi-faceted approach to tackle the client’s healthcare costs, focusing on reinsurance negotiations, pharmacy benefit management, medical claim savings, and member engagement. The strategy was designed to optimize cost-efficiency and streamline the company’s benefits structure, resulting in immediate and substantial savings.
Key Actions and Results:
Reinsurance Renewal Negotiations:
First-year reinsurance renewal: The initial renewal was set at a 26.99% increase. Through strategic negotiations, and formal review of the claims, The ECO team was able to reduce this increase to -4%, delivering immediate savings for the employer in the first year.
Second-year reinsurance renewal: The increase was originally projected at 8%. The ECO renegotiated the terms to reduce it to 6%, ensuring continued savings in the second year.
Pharmacy Benefit Management Transition:
The ECO transitioned the company’s Pharmacy Benefit Manager to a more transparent arrangement. This arrangement resulted in an un-bundled fee base approach which is counter to the markets spread pricing arrangements.
The new arrangement also included carve-outs for specialty drugs, saving the company over $160,000.
Generic Conversion Strategy: The ECO’s pharmacy strategy led to a 90% conversion from brand-name medications to generics, resulting in a 47% decrease in pharmacy costs compared to the previous arrangement.
Significant Reduction in Pharmacy Costs:
The Pharmacy Benchmark Per Member Per Month (PMPM) dropped from $137 to $81, representing a 40% decrease in pharmacy spend. This reduction translated into a 44% decrease in pharmacy claims paid.
Medical Claims Savings:
Through September, the employer saved a total of $1,490,074 in medical claims paid compared to their previous PPO arrangement. This was a direct result of strategic claim reviews, provider steerage, and program optimization, and direct contracting.
Program Savings:
Member Medical Billing Reviews: The ECO’s team identified $3,445 in savings from medical billing reviews.
Provider/Facility Steerage: The team achieved $77,350 in savings by guiding members to more cost-effective providers and facilities.
Telemedicine Visits: By leveraging telemedicine services, the company saved $35,950 in visits, including $28,930 for general medical and $7,020 for mental health services.
PBM Contract Renegotiation:
The ECO successfully renegotiated the PBM contract, securing more favorable terms now that they had access to detailed Rx data, ensuring that future pharmacy costs would remain under control.
Outcome: Within 12 months, the employer saved over $1.5 million. The savings came from a combination of strategic negotiations, transparent pharmacy pricing, cost-effective medical care, and a targeted approach to benefit management. The company not only reduced its overall healthcare expenses but also improved the quality of care and access for its employees.
Conclusion: By implementing a holistic, transparent, and client-aligned benefits strategy, The ECO was able to deliver significant cost savings while maintaining or even improving the quality of healthcare for the employer’s employees. The partnership exemplifies the power of data-driven decision-making, strategic planning, and transparent pricing in driving real, measurable savings.
If you're facing similar challenges with healthcare costs and want to see how The ECO can help your organization, reach out to our team for a personalized consultation.