When Michael Schneider took over as CEO of Dallas-based A1-Locksmith, he realized that the company’s fourth highest expense was healthcare and knew he needed to do something about it. With healthcare costs continually rising each year, he decided to make the company self-insured and established direct contracts with primary care physicians to save money and change the incentives behind the care his employees were receiving.
Moving to direct contracts has become especially important for physicians during the COVID-19 pandemic, as many people are avoiding going to the doctor. Fee-for-service revenues are plummeting, causing many practices to wonder how they will keep the lights on. Direct contracts can help provide steady revenue to physicians while providing more efficient care.
Working with a traditional insurer in the fully insured market, premiums came back higher each year for Schneider. “No matter how healthy we got, every time our broker would come in, claims would go up,” Schneider says. When he realized that his broker was being paid by the carrier, he concluded their interests weren’t aligned. “We started to educate ourselves more on what our options were.”
He began looking into other models, and liked the way direct primary care worked, but knew it might be expensive to give all of his employees a concierge experience. So they made the decision to go self-insured, and found a third party administrator to take care of claims. A1-Locksmith negotiated prescription and stop loss coverage on its own. With a plan that covered 100 employees and around 400 lives, they were on the edge of affordability, but they made it work.
Schneider said many of his employees felt “young and invincible,” and would resist regular check-ups with the doctor, but then would end up in the emergency room when a nagging problem that could have been fixed upstream became an expensive emergency. For an industry like Schneider’s, sick or injured workers are directly lost wages. There is no such things as working from home for most of his employees.
Savings came from negotiating and being self-insured, but the company still has a traditional insurance plan that includes primary care, specialty care, and other services. But because of the need for quick and efficient response times, Schneider decided to pay for direct contracts with value-based physicians on top of their normal insurance plan, which includes a monthly fee paid directly to the physician to cover all of that employee’s primary care needs. He foresees that it will mitigate and reduce long term health claims, though the transition is new and he doesn’t have the data just yet.
Direct contracts do not come without challenges. Employees are sometimes forced to leave their doctor, and the direct primary care practice might not be in a convenient location for employees who may work all over DFW. A1 worked with Catalyst Health Network, which has physicians all over North Texas, and Carrollton-based Accresa, which helped connect employees to physicians, to bring the network together.
Accresa is the operating system physicians, healthcare providers, consultants, health insurance carriers, employers, employees, and patients use to communicate and find physicians who are in the direct contracting network. The technology can also help connect traditional fee-for-service physicians and help them transition to value-based care, becoming hybrid models. This helps employees add their physicians to the network if they aren’t already doing direct contracts or value-based care, providing access to the physicians who employees want.
Accresa CEO Will Short sees direct contracting as the way of the future, especially for primary care. Employers pay a fixed monthly fee per month per member, and employees get to choose the physicians they want to see, and the operating system makes sure providers receive their monthly payments and members have choice. The direct care model disincentivizes unnecessary treatment, extra labs or procedures, as the doctors are not billing for each individual service, but focus on what will keep the patient healthy. “We don’t use car insurance to pay for gas or an oil change, so why are we using health insurance to take care of routine maintenance?” Short says.
It took around a year for A1 employees to become familiar with the Accresa technology and direct primary care model, but as word traveled about the service employees were getting, it became a part of the culture. Accresa brought physicians into the office to speak with employees, and explain the care model. “They said, ‘This is about you and your relationship with your doctor,’ which I thought was smart,” Schenider says.
Looking ahead, Schneider hopes to be able to unbundle primary care from his insurance plan, and build a plan where the direct contracts cover primary care and other coverage is for specialists and hospital visits. But for a smaller employer, it can be difficult to get the insurers to accept a different way of doing things. “It’s hard to get traction in the market,” he says.
While things might be slow to move amongst the major insurers and providers, there are more nimble organizations in DFW doing their best to fill the gap and change incentives for physicians. While Schneider never saw himself as a pioneer in healthcare, he realized it was what was best for the company. “I didn’t want to fix healthcare, but I have a duty to do the best for my employees.”