Overview
Employer-sponsored coverage is the dominant model serving about 54% of US citizens (Andrews, McGuiness & Troy 2016). However, company-sponsored care is changing fast in response to supply chain integration and costs that are increasing in a trajectory that is likely to make health care unaffordable. Since 2000, employee earnings have risen by 50%, whereas premium contributions have grown by 213% (Andrews, McGuiness & Troy 2016). On the other hand, insurer consolidation is increasing, providing greater marketplace advantages to insurance firms.
The Challenge Addressed
The recent cost hikes can be linked to the Affordable Care Act (ACA) of 2010. While ACA sought to lower health care costs, Wang and Gee (2015) found that insurance firms covering ACA clients have reviewed their rates upwards by 10% to 23.9% since 2010. The configuration of ESI is such that large companies self-fund the medical care of their workers/families via insurers that receive monthly deductibles (Radnofsky 2016). Multinational enterprises (MNEs) face another hurdle related to diverse care needs. A creative model to address these challenges would involve the banding together of multinationals to buy a uniform insurance policy, as opposed to operating as lone actors.
The Proposed Approach
The proposed ESI model involves collaboration among large multinationals, as opposed to buying insurance as single actors. This approach is a cost-efficient way of providing quality and affordable health care to employees. It would increase the bargaining power and leverage derived from a large workforce and a big budget to obtain better deals for the workers (Jones 2016). The corporate spending would result in cost savings, quality care for employees, and significant flexibility across regions and populations for MNEs.
How It Works
The proposed approach will use a pooling mechanism to gain from a cost-efficient cover for all clients. Big multinationals will form a coalition and increase the premium volume that will provide economies of scale (Enright et al. 2016). The headquarters of these firms will contract a global insurance network that will select eligible contracts to create a pool of employees from different companies or countries. Local insurers will be recruited to serve each pool based on standard premium rates in the original agreement.
Rationales for Multinational Pooling
Approaching insurers as a coalition, not as separate entities, can provide value to MNEs. The specific rationales for working together include better deals (lower premium prices) due to the large employee population, leverage in the marketplace, and consistent, high-quality care for clients (Andrews, McGuiness & Troy 2016). MNE consolidation enhances access to technology by staff and can help influence ACA payment changes. Through multinational pooling, MNEs can bargain for lower premiums across different markets. It also allows for flexible contracts that reflect the healthcare realities in various countries.
Unified Coverage Axes
There are several axes to unified coverage for different employees. The banding together of MNEs increases the size of the pools, i.e., employee population eligible for each pooled contract (Moffit & Meredith 2015). Thus, the collaborative approach creates economies of scale that results in lower insurance prices. The minimum requirements for a pool – employees and countries – would determine the value-added services offered. A not-for-profit alliance would maintain the legitimacy of such unions across different countries. The bidding for coverage of the pooled contracts by insurance networks occurs at the macro level. Quarterly reports on claims give information on premiums and claims.
Number of Employees
Approaching the insurance marketplace as a unified entity has several advantages over acting singly. Pooling increases the number of employees. The worldwide clientele gives MNE coalitions the economies of scale to bargain for lower insurance premiums for each pool (Moffit & Meredith 2015). As a result, significant cost savings can be made from these deals. Further, higher premium volumes can lead to lower coverage costs and better international dividends. The coalitions can also look for contracts that promise improved access and high-quality care for the employees.
Requirements for Pooled Contracts
Pooling primarily applies to employer-sponsored contracts. Employee contributions or deductibles may not be appropriate because of the challenge of equal distribution. Key considerations when adding an entity to a pool include company demographics and risk profile. Explicit premium thresholds and charges for clients ensure transparency in claims and dividend administration. Further, the financial risk related to deficits may arise. Employers can manage these losses through stop-loss agreements in the contract or by carrying them forward to the next year (Burke, Misra & Sheingold 2014). Surpluses can be paid as an international dividend or an annuity to low-risk pools.
Legitimacy of Unified Coverage
The legitimacy issues surrounding unified coverage plans relate to compliance with local laws and regulations. The coalition should adopt a not-for-profit structure. In this regard, the companies should have no stake in the plan to avoid conflict of interest issues. The multinational insurance network offering coverage should contract domestic carriers whose products are designed according to local laws and practices regarding mandated universal coverage (Burke, Misra & Sheingold 2014). The regulatory regimes and taxes should be considered in writing the contracts. Monitoring taxation and currency exchange rates can avoid noncompliance issues.
Bidding for Unified Coverage
Bidding for unified coverage aims to secure the most cost-efficient deals. The MNE coalition can create pools of countries or employee populations that need medical insurance. The head offices can then sign contracts with a network insurer providing the best terms. The provider pools agreements based on second-stage accounting, i.e., aggregated premiums and expenses (claims) (Dafny, Gruber & Ody 2015). The insurer determines the administrative charges and dividends through negotiations with local carriers. All these factors are revealed to the MNE coalition, which then selects the network with the best deal.
Unified coverage in America & EU
The possibility of applying the unified coverage to countries outside the US exists. This approach would need a multinational pooling strategy, which entails contracting a network insurer or reinsurer to add subsidiaries to existing pool depending on individual risk profiles (American Medical Association 2016). However, the model must be aligned with the organizational objectives. Partnerships with local carriers will ensure clients in each country receive adequate coverage. Key considerations when applying this strategy include how to pool comprehensive medical cover, life and accident coverage, and disability benefits across countries with different social insurance regimes in the Americas and EU.
The Approach in Action
In practice, large companies have formed coalitions to provide cost-effective health care for their staff. The HTA is an alliance comprising 20 American corporations, including Verizon Communications, Shell Oil, IBM Corporation, etc. (Jones 2016). The coalition leverages on the combined market power and collective spending to deliver affordable and quality care for the employees. This approach also facilitates the exchange of data and expertise between members to become robust coverage purchasers (Jones 2016).
Proposed Actions
Building on existing unified coverage initiatives, the proposed approach should focus on areas that require maximum impact. For example, data on staff health outcomes may reveal that most of the employees have diabetes. Insurers providing quality health care for diabetic patients at affordable prices should be selected. An employer-sponsored policy is preferred to employee contributions because of issues of equal distribution and cost management (Troy & Wilson 2015). Further, the plan should be flexible or adaptable to local health needs.
Conclusion
Based on the examples reviewed, the banding together of corporations to seek coverage for employees as a coalition is a useful risk management tool for addressing high costs. The benefits of such an approach include higher financial dividends derived global cost savings, competitive premium prices, better health care quality and access, and long-term sustainability. However, this model requires an effective multinational pooling strategy to achieve savings. A network insurer can offer better global healthcare benefits, as it selects locally admitted insurance carriers for each country.
Reference List
American Medical Association 2016. Competition in health insurance: a comprehensive study of US markets. American Medical Association, Chicago, IL.
Andrews, RE, McGuiness, JC & Troy, TD 2016. Towards a new model of health care: employer-facilitated care. American Health Policy Institute, Washington, D.C.
Burke, A, Misra, S & Sheingold, S. 2014. Premium affordability, competition, and choice in the health insurance marketplace. Web.
Dafny, L, Gruber, J & Ody, C. 2015. ‘More insurers lower premiums’, American Journal of Health Economics, vol. 1, no. 1, pp. 53-81.
Enright, P, Dobelbower, N, Brewer, R, Tyler, M & Giordano, O 2016, Maximizing employee benefits through multinational pooling, Lockton Companies, Kansas City, MO.
Jones, K. 2016. Major companies band together to control health care costs. Web.
Moffit, RE & Meredith, NR 2015. Multistate health plans: agents for competition or consolidation, Mercatus Center, Arlington, VA.
Radnofsky, L 2016. Companies form new alliance to target health-care costs. Web.
Troy, TD & Wilson, DM 2015. The affordability of employer sponsored care and the ACA exchange health care plans, American Health Policy Institute, Washington, D.C.
Wang, E & Gee, G. 2015. Larger issuers, larger premium increases: health insurance issuer competition post-ACA. Web.