An Accountable Care Organization (ACO) is a self-insured health benefit plan model in which employers directly contract with medical providers, explains Xavier Serrano, vice president of employee benefits at CBIZ in San Diego, California.
An ACO is similar to a health management organization (HMO) in the sense that there is a narrow network of health care providers; however, rather than contracting with insurance companies, employers contract with providers at a reduced rate and providers are incentivized to reduce costs for employers that contract with them. A third-party administrator (TPA) works with the employer and providers to administrate and facilitate the plan.
With an ACO, the employer and providers set a budget for health benefits—for example, $1 million. If costs go above that, stop-loss insurance will kick in. However, if costs are lower than the health benefits budget, the employer and providers will share in the savings—incentivizing providers to keep costs down.
One way costs are kept down is by using a chronic disease management and tracking system, Serrano says. The most chronically ill employees are identified, and a regimen of care is set up for them. Patients are coached into a quality, narrow network of providers. Providers are given a manageable case load and work with these patients one-on-one. According to Serrano, a medical director at the TPA works with employers to identify the employees that are driving up costs and sets up a game plan to keep them from doing so.
“Most employers never see this data,” he says. “Some self-insured employers have some data, but they are not doing anything with it or partnering with providers to reduce these costs.”
Serrano says very large employers have been using the ACO model, but it is now moving down market. “We are consulting in multiple markets,” he says.
“The ACO model lowers costs by setting a benefits budget and managing high-risk employees,” according to Serrano. He adds that improving the health of employees also lowers worker’s compensation claims.“We’ve seen savings between 18% and 30% for employers,” Serrano says.