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June 21, 2010 at 08:00 PM
Being a health care provider does not necessarily make someone a health care benefits expert. Hospitals in particular have unique challenges as they attempt to manage their rising health care benefit program costs.
Producers who understand this segment and the design implications can successfully grow their business.
The goal of most hospital employee benefits programs is to drive domestic utilization. This serves three primary purposes. First, medial services are delivered in an environment where they have greater control than most employers do over cost and frequency of care. The hospital determines the appropriate level of reimbursement (which may require a separate fee schedule) and sets the practice limitations. It has the greatest ability to control its health care trend when services are delivered internally.
Second, domestic utilization by the hospital’s employees is a revenue source to the institution. Few companies like giving revenue to their competitors, and hospitals are no exception. In today’s environment, where institutions are looking at all options to increase their revenue flow, this can have a significant impact on their income statement. 
Finally, the best advertising for many organizations is when their own employees are also customers. After all, employees know more about their company than most. Domestic health care utilization is a strong endorsement of the institution by the employees.
However, most hospitals have found in the absence of benefit design incentives to impel that behavior, they will not meet their expectations. This is because of a variety of reasons, the most common being privacy. To encourage domestic utilization, hospitals increasingly are employing three-tier benefit programs. The tiers are:
1. Domestic benefits.
2. Preferred provider organization benefits.
3. Non-preferred-provider-organization benefits.
A sample design may look as follows:
