Health Benefit
Contract Review

If you’ve ever tried to conduct your own health benefit vendor contract review, you might already have found out how easy it is to miss important details in the fine print. The team at LHD knows what to look for based on our experience reviewing hundreds of contracts over the years. It’s an essential piece of our vendor management process that gives you the peace of mind any and all issues will be identified and resolved before you finalize the contract.

The LHD Vendor Management Process

At LHD, we offer a multi-step process for total vendor management. This will take a huge burden off the shoulders of your HR team so they can focus on other priorities. With LHD as your liaison with vendors, you can rely on our proactive team approach throughout the following process:

• Step 1 RFP: This is where we handle the all-important request for proposal piece of the puzzle to negotiate with vendors to obtain the most competitive annual renewal.
• Step 2 Implementation: In this step, we help administer the year’s benefit changes with the carrier and resolve any issues.
• Step 3 Contract Review: Too often, this essential step is overlooked. LHD will carefully review the quality and accuracy of all contracts.
• Step 4 Client Management: Here is where LHD helps with HR training, making any term and contact changes, and assists with managing payroll updates.
• Step 5 Benefit Administration: LHD’s benefit administration system simplifies onboarding, management, and renewal.
• Step 6 Customer Service: We offer ongoing customer services for claims, Rx, eligibility, or billing issues.

This page focuses on the third step of the vendor management process, which is Contract Review.

In a Health Benefit Vendor Contract, Details Matter

Like any legally binding contract, a subject matter expert should carefully examine it. You need someone with the knowledge and experience who knows what to look for. While some employers may have the in-house expertise to conduct such a review, many more do not. Whether it’s a health insurance carrier, a pharmacy benefits manager (PBM), or some other major player’s contract, you need to know everything in it is correct before signing it. LHD is ready to help by conducting each health benefit vendor contract review for you in a timely fashion to ensure any issues are dealt with promptly to move the process forward.

The Wild Card of Timing

One of the many ways things can go sideways is when your existing vendors are late in getting renewal information to you. Like many employers in today’s increasingly tight labor market, carriers are experiencing serious staff shortages. In many cases, this delays you getting the renewal rate information you need to budget for next year’s health benefits correctly and determine what changes need to be made in your company’s offers to employees. Recently, we’ve seen carriers wait until only 60–75 days before the end of a contract to send renewal information. This is simply unacceptable, given what’s at stake.

This is when it pays to have a benefits consultant and advisor like LHD in your corner. We consider it part of our job to advocate on your behalf with carriers to get what you need when you need it, regardless of the broader economic climate. To us, it needs year-round attention to keep everything on track, which means your HR team likely doesn’t have the bandwidth needed to do so. LHD helps maintain a good relationship with your carrier(s). In our experience, when this relationship is solid and well-timed, contact with a carrier will get results. Left unchecked, however, they will leave renewal information until the last minute, which puts you in a difficult position.

Our general goal is to get renewal information from carriers at least 120 days in advance, so there is plenty of time to conduct a thorough review of your needs and plans. This way, if you decide it’s time to switch carriers, there is time to get RFPs out the door and orchestrate a switch before the current contract period ends.

An Overview of What We Look for During Contract Review

An exhaustive list of everything that needs to be carefully reviewed in a health care contract is far beyond the scope of this page, but below is just a sampling of items we look into:

● Accumulators: If a carrier change takes place, will the new carrier credit expenses incurred during the same accumulation year? In many cases, the new plan will allow credit for expenses applied to the deductible in the prior plan during the same calendar year. Still, a credit will generally not be applied toward out-of-pocket cost maximums.
● Deductible cross-application: Some plans put in-network deductibles toward out-of-network, but not out-of-network to in-network while others just keep them completely separate.
● Deductible for family members: Is the deductible per person or family? If the plan has a $1,000 single deductible and a $2,000 family deductible, does the full $2,000 family deductible apply before charges for one or more covered persons are reimbursed?
● Run-out provisions: If you terminate your plan, you need to know if incurred-but-unpaid claims will process and whether this comes at an additional cost.
● Claim reimbursement: You’ll want to know if reimbursement happens automatically, and if not then what the guaranteed funding timeframe is.

Things get even trickier if it’s a PBM (pharmacy benefits manager) contract. The whole PBM phenomenon is still new enough that its landscape changes and evolves even more rapidly than the rest of the health insurance industry, which is already in a state of constant change. LHD keeps up with all the developments in the world of PBMs, so we know what to look for when reviewing contracts, including things such as the following:

● Brand-name drugs vs. generics: PBMs are always tinkering with how they handle brand-name drugs versus generic equivalents, and usually ends up costing more at the point-of-sale.
● Specialty drugs: They’re expensive and can account for as much as 50% of an employer’s total drug spend. It’s critical to drill down into the details of how specialty drugs are being handled in terms of qualifications for the full rebate on them.
● Limited distribution of drugs: The subset of LDDs can make up 25% of specialty drugs, yet many PBMs exclude LDDs from the guaranteed specialty drug rebate.
● Specialty drug lists: These can change from one contract period to another and must be examined closely because which list a drug appears to will determine its discount guarantee and which rebate guarantee applies.

The points listed above don’t even scratch the surface of everything we look for when conducting a health benefit vendor contract review.

LHD: Your Trusted Health Benefits Vendor Management Partner

Given the number of details to pay attention to in a health insurance carrier, PBM, or other health benefit vendor contract review, it should be no surprise that most HR teams don’t have the capacity to do it right. The good news is that contract review is folded right into our overall vendor management process and services. With decades of experience in vendor management and contract review, your company will have the peace of mind that comes from knowing experts are handling everything. Discover more about all the services LHD provides employers like you by getting in touch with us through the Contact page of our website, by telephone at 371.751.7049, or by email at lhdbenefits@lhdbenefits.com.