Three Ways Health Plans Can Address the Growing Demands of Self-Funded Employers

Chances are, if you work in health plan sales or account management, you are well aware that employers are increasingly choosing self-funded or administrative services only (ASO) plans. In 2021, nearly two-thirds of employees were covered by an ASO plan, up from 44 percent in 1999. Traditionally, large employers used self-funded plans but it’s increasingly true for small and medium-sized companies too. A 2020 Deloitte study showed that 60 percent of covered workers in organizations with three or more employees were in partially or entirely self-funded plans.

  1. Offer Better Program Evaluations

The expectations of self-funded employers are rising. ASOs and their brokers are increasingly requiring health plans to prove their worth and quantify the value of their care management programs. They’re doing this against the backdrop of increased competition among digital health point solutions promising better cost, quality, access, and engagement outcomes. As the Wall Street Journal reported last year,

“Numerous health apps promise to promote well-being, manage diabetes, improve sleep, monitor heart health, encourage weight loss and track whether patients are sticking to physical-therapy regimens, among others. Mental health, a growing area due in part to pandemic burnout, has spawned more than 100 startups.”

At NextHealth, we help health plans measure and validate the impact of programs. Self-funded employers are looking for metrics like overall claims cost, the discount applied, dollars returned as rebates, and more. Some of the largest employers are seeking sophisticated analyses on core care and cost areas such as meaningful employee engagement and the number of employees who have reduced their risk score and/or are successfully managing chronic conditions.

For example, NextHealth worked with a Blues plan with a large ASO client that sought quantification of the value of a buy up (adding service) of a behavioral health care management program. Absent proof, the employer intended to switch to a niche competitor.

Using NextHealth Healthcare Program Evaluator for ASOs, the plan quantified the behavioral health program’s outcomes and showed statistically significant savings:

  • Improved acute inpatient behavioral stays and costs: ASO employees had an inpatient PMPM of $2.09 versus $6.32 for the matched cohort.
  • Higher utilization of lower acuity settings: Intensive outpatient visits were 23.9 per 1,000 members compared to 28.0 for the matched cohort.

The employer group trusted the NextHealth analysis and continued to use the health plan’s behavioral health buy-up.

In short, NextHealth helps health plans measure standard ASO metrics as well as the custom and complex ones sought by the largest employers.

2. Improve Outcomes Support

NextHealth not only helps quantify the value of programs, but we also help health plans improve outcomes for their ASO clients, even the seemingly intractable ones.

For example, a Blue plan in the southeast asked NextHealth Technologies to help decrease avoidable emergency department visits for an ASO employer with more than 40,000 insured members. The group was experiencing high overutilization of the ER, and the employer’s efforts to engage employees through its human resources department was not delivering results.

NextHealth Member Intervention Optimizer identified four segments of their population that, if engaged effectively, would lead to reduced ER utilization. The four segments – young adult females with prior ER visits, young adult females with no prior ER visits, new members, and those at high risk for ER utilization – represented 40 percent of the employee population but were responsible for 80+ percent of the avoidable ER visits. Once the segments were identified, NextHealth developed segment-specific messaging to educate, engage and activate these members.

In short, our approach worked, satisfying the health plan and their employer client by achieving reductions of 70 ER visits per 1,000 visits and $162 in ER costs per member per year (PMPY).

3. Provide Guidance on Selecting the Most Appropriate Digital Health Solutions

As previously noted, the number of digital health point solutions has exploded during the COVID-19 pandemic, and given the investments in digital health companies, I expect this number to continue to grow. Even the savviest employers are struggling to evaluate them. In the words of Meredith Touchstone, director of benefits at CarMax, “We are inundated. We already have these very big portfolios of vendors. And with all this new stuff coming into the market, there’s no way to assess, literally thousands.”

In the face of this competition, health plans have a unique opportunity to help ASO employers navigate the universe of digital health solutions as a value-add service. Knowing which digital health vendors to choose, how to drive engagement, and what outcomes to expect isn’t easy for employers. But health plans have access to the data to guide and drive these important decisions.

That’s we created the NextHealth Digital Vendor Marketplace—to provide health plans access to Outcomes Assessment Reports on digital health vendors. These reports show the cost outcomes achieved by different vendors for various population segments and outline engagement strategies proven to drive adoption. The reports are completed on vendors the health plan is currently utilizing and supplemented with comparable reports from other payers. The entire portfolio of reports enables the health plan to act as a strategic advisor to its ASO clients.

For example, our analysis has demonstrated that a leading diabetes point solution works best with health plan members with a lower HbA1C but does not lead to better outcomes for high acuity diabetics. This insight is helping health plans to counsel their ASO clients to choose the most appropriate combination of solutions for their population.

In summary, NextHealth is helping health plans measure and improve outcomes for ASO employers as well as navigate the increasingly crowded field of digital health solutions. We can help you too. To learn more, visit here.


Peter Everett is a highly accomplished executive and entrepreneur with significant experience in healthcare and technology. Peter was an early investor in NextHealth and has served on its Board of Directors since its founding. He serves as CEO and oversees all major operational areas of the company including Sales, Marketing, Finance, Product, Engineering, Analytics, Client Services, and Human Resources. Peter holds a BS in Industrial Engineering and MBA degrees from Cornell University.

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