The LA Times recently featured a story on a New England labor union that kept medical bills in check. “Everyone says we can’t do anything about costs, or we just have to get patients to put more ‘skin in the game,’” said John Brouder, a longtime health benefits consultant who worked with [the union] Local 26 to develop its health plan. “This union showed that’s not true.”

Any employer group can achieve similar results. Costs can be contained.  Here are some thoughts that center around the success of this Boston labor union, Local 26 Hotel Employee Restaurant Employee Union, where workers pay $16 a month for a single’s plan and $48 a month for a family plan.  Compare that to the average national health plan that requires workers to pay $104 for a single’s plan and $501 a month for a family option and the difference is staggering.

What did they do that was different? Our friend Dawn Cornelis breaks it down:

1. The key to success was ACCESS to DATA. The Union simply reviewed the health plan claims data. By doing so, they revealed the cost disparity between hospitals. For example, pricing differences for the same hip replacement procedure at different locations highlighted significant variation. In this example, sophisticated analytical tools weren’t necessary as simply applying common sense while reviewing the data was all that is required to identify a concern.

  • Beth Israel Deaconess Medical Center      Price Tag $28,359
  • Massachusetts General                                 Price Tag $55,362
  • Brigham and Women’s                                  Price Tag $65,073

2. This UNION had no other choice and it was up to them to change the health plan. They were determined to fulfill their role as good fiduciaries in the best interest of the members and wouldn’t continue to shift cost and burden without considering other options. It was obvious where a member should go to get a hip replacement.  So, after reviewing all their data that included cost and quality of care, they designed a plan to steer members to specific hospitals where members would receive the best care for the lowest cost. The union and its members benefited from the narrow network they created.

3. By challenging the status quo, the union managers were met with resistance.  However, once members realized the impact of premium reduction with an increase in pay, they were fully on board. The fund continued with member education and focused on strengthening communications on all forums, a key factor in achieving buy-in from members.

4. Once data is tapped, the possibilities are endless. Up to 25% of claims cost reduction can be accomplished through 3 simple phases.

  • Phase I:   Review your claims data.  Perform a retrospective review of all claim transactions to determine if claims have been paid in accordance with the rules and consistent with plan documentation. Identify key cost drivers and analyze  network effectiveness as a key part of controlling healthcare expenditures.
  • Phase II: Discovery leads to recovery, so any post payment review program should include recovery of improper payments for both plan and member. Most recovery solutions neglect member liability corrections in violation of ERISA and simply doing what is right… Phase II should identify areas for improvement and stop recurring problems by fixing underlying issues that resulted in claims overpayment. Corrective action plans must be part of any post payment review program.
  • Phase III: Take the analysis a step further to determine additional ways to extract unreasonable cost as demonstrated by Local 26. At this phase, transparency meets accountability.

Dawn’s insights on this topical issue are incredibly valuable, opening the door to further discussions on topics such as transparency – which is what we will be covering in the next part of this series. In the interim, we invite you to share your thoughts with us now. Do you know a union or employer group that pulled off a similar plan of action? Do you feel that deductibles are still increasing too rapidly, and you’re not sure where to start to stop it? We want to hear from you. Email us to share your story.