How Direct Primary Care Can Lower Costs and Boost Your Return on Premium

APRIL 4, 2023

Small businesses that have a fully insured health plan often turn to level-funded plans as an alternative to help reduce the impact of healthcare costs on their organization. Under a level-funded health plan, employers pay a fixed premium every month, similar to a fully insured plan. However, unlike a fully insured plan where insurance companies use factors like geographic area, age, benefit coverage elected and tobacco use to set the rates for all small businesses, a level-funded plan‘s premium is calculated on the individual employer’s experience.* This can reduce fixed insurance costs for the employer and create an opportunity to receive a refund if total claims costs are lower than the premium paid. Employers in level-funded plans are thus incentivized to keep the costs of healthcare low for their employees to encourage preventative care and hopefully reduce overall claims.

Routine healthcare and chronic condition management are well-known to improve overall population health — significantly reducing long-term costs and the impact of large claims on a level-funded plan. However, needing to take time away from work for medical appointments, high out-of-pocket expenses, and traditional fee-for-service billing practices can often make healthcare cost-prohibitive for employees. This unmanaged care can seriously affect health outcomes, driving up the overall cost of care and increasing the likelihood of large and catastrophic claims.

Given the challenges with traditional healthcare, level-funded plans may not see the anticipated refunds. Employers looking to maximize their return can consider adding a direct primary care (DPC) arrangement to encourage routine care.

The Benefits of Direct Primary Care

DPC is an alternative primary care model that can provide more affordable care options, removing barriers that would otherwise prevent employees from accessing routine and preventive care. Under a DPC arrangement, the employer or employees pay a fixed cost directly to a healthcare provider for an unlimited amount of care. While DPC comes in many different forms and pricing models, the fee typically covers all or most primary care services, including office visits, telemedicine consultations and basic lab tests. Some DPCs take a more innovative “on-demand” approach, providing more flexible telehealth or virtual care with the added convenience of home visits for services that cannot be provided virtually. Many also provide pharmacy access, offering zero-dollar copays for commonly prescribed medications.

Compared to a traditional care model, the flexibility and cost-savings provided by a DPC can have a significant impact on a level-funded health plan by reducing overall healthcare costs for both employers and employees:

• Lower cost to access healthcare services, no out-of-pocket expenses, and convenient care options make employees more likely to access primary and chronic care services.
• Routine physician engagement for preventive and chronic condition care reduces the need for expensive hospitalizations and emergency room visits, and can lead to better health outcomes over time, reducing the impact of high-cost claims.
• Unlike certain telemedicine or drop-in clinic services, many DPC arrangements are able to facilitate patient-physician relationships for ongoing engagement similar to a traditional care arrangement.
• The fixed per-employee fee makes healthcare a more predictable expense for employers by reducing the wide-ranging costs of traditional fee-for-service care.

Reduced claims costs from increased healthcare engagement and lower overall costs of care may offset the cost of covering a DPC service for your employees.