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Pricing Options for EAP Services

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Abstract

This Research Note reviews the issues concerning how the pricing is determined for the purchase of employee assistance program services. What Are EAPs? Employee Assistance Programs (EAPs) are employer-sponsored programs designed to alleviate and assist in eliminating a variety of workplace problems. EAPs typically provide screening, assessments, brief interventions, referrals to other services and case management with longitudinal follow- up for mental health concerns and substance abuse problems. The source of these employee problems can be either personal or work-related. Those who work for EAPs come from many different professions including social workers, psychologists, counselors, substance abuse specialists, occupational nurses, and others. In Canada, the services are called Employee and Family Assistance Programs (EFAPs).
Pricing'Options'for'EAP'Services
_______________________________________________________________________________________________________________________________
Mark Attridge, PhD, MA
Attridge Consulting, Inc.
Tom Amaral, PhD
EAP Technology Systems Inc.
Tom Bjornson
Claremont Behavioral Services
Eric Goplerud, PhD
George Washington University
Patricia Herlihy, PhD, RN
Rocky Mountain Research
Tracy McPherson, PhD
George Washington University
Rich Paul, ACSW, CEAP
Value Options
Sandra Routledge, RN
Watson Wyatt Worldwide
Dave Sharar, PhD
Chestnut Global Partners
Diane Stephenson, PhD, CEAP
Federal Occupational Health
Lisa Teems, DMin, LCSW, CEAP
Federal Occupational Health
& Members of EASNA’s Knowledge
Transfer and Research Committee
_______________________________________________________________________________________________________________________________
This research note contains material from EASNA’s publication, Selecting and Strengthening Employee Assistance Programs: A Purchaser’s Guide.
Copyright ©2009 Employee Assistance Society of North America (EASNA). The Purchaser’s Guide is available at no cost from EASNA.
Contact at: Phone: (703) 416-0060 Website: www.easna.org Address: 2001 Jefferson Davis Highway, Suite 1004, Arlington, VA 22202
_______________________________________________________________________________________________________________________________
ABSTRACT. This Research Note reviews the issues
concerning how the pricing is determined for the purchase
of employee assistance program services.
What Are EAPs? Employee Assistance Programs
(EAPs) are employer-sponsored programs designed to
alleviate and assist in eliminating a variety of workplace
problems. EAPs typically provide screening,
assessments, brief interventions, referrals to other
services and case management with longitudinal follow-
up for mental health concerns and substance abuse
problems. The source of these employee problems can
be either personal or work-related. Those who work
for EAPs come from many different professions
including social workers, psychologists, counselors,
substance abuse specialists, occupational nurses, and
others. In Canada, the services are called Employee
and Family Assistance Programs (EFAPs).
Pricing Options for EAPs
Another key aspect of selecting an EAP is determining
what is the proper price to pay for the services. The
three most common approaches to pricing are
described next in this guide, including the capitated
approach, the utilization-based approach, and the “pay
for performance” approach. In most contexts the
employer pays for the EAP, but in some organizations
the union or other organizations within the company
share the cost of the program.
Capitated Pricing
For many years the most widely used pricing approach
by External EAP program vendors is the capitated or
per capita financial structure (i.e., per employee per year
-- PEPY or per employee per month -- PEPM). This
approach uses a total fee for all EAP services to the
organization and simply divides the fee by the number
of covered employees at the organization. This pricing
approach is easy to understand from the purchaser’s
perspective and perhaps more importantly, it mirrors
the insurance-based pricing model used to purchase
many other employee benefit services (e.g., health
insurance, life, disability).
Some of the reasons why many employers prefer a
capitated pricing structure is because it provides a
consistent budget for EAP services, the price can be
lower than other pricing approaches and it forces the
EAP to take the financial risk for the program if the
level of use exceeds what was anticipated in setting the
price in advance. However, many EAP providers are
now concerned with the marketplace consequences of
this pricing approach and what has been called the
“commoditization” of the EAP industry.1 The main
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concern is that some purchasers and benefits brokers
may view the EAP marketplace as offering an
indistinguishable product that does not change much
in quality or business value from one provider to
another.2 This perspective has resulted in purchasing
decisions for selecting EAPs that are driven primarily by
price, rather than carefully examination the kinds of
usage, the range of services, and the quality and
effectiveness of the program.3
The EAP is profitable on the contract to the extent that
it correctly anticipated the level of use of the EAP and
how much it costs to provide that level of use. If the
level of use is at or below the level used to set the
captitated price, then the EAP makes a profit or breaks
even. But if the use ends up being higher than the
target level used to set the pricing, then the EAP loses
money in servicing the organization. Thus, with
capitated pricing it is very important for the EAP to be
able to make the right guess for how much the service
will be used during the contract period.
Capitation pricing can also be perceived as creating a
financial incentive for the EAP provider to deliver as
little service as possible. This is because the price for
the service is fixed and the only part of the price-to-
service cost equation that can vary is the amount of
services that are used and the associated operating costs
for the EAP to deliver those services. Thus, the lower
the use of the EAP, the more money the EAP will make
from the contract. This criticism breaks down,
however, at some point when there is so little use of the
EAP that it is then considered ineffective and the
service contract is not renewed by the purchaser.
Pricing and Session Limits. Many purchasers are
concerned about the contractual limits for the
maximum number of sessions per treatment case for
counseling sessions provided by the EAP. The specific
number of sessions for the limit varies considerably
across EAP providers, with a range of 1 to 6 sessions (or
more). A recent survey found that clients who were
referred to network affiliate counselors from EAPs with
a variety of session limit models tended to average
about 4 sessions per case.4 According to data from
several sources, there was a range of between 3.5 and
4.5 EAP counseling sessions used per case when there
was a six-session maximum limit model.5,6,7 More
generally, EAPs with a telephonic-based program tend
to have fewer average contacts per case than what is
typically found with face-to-face programs.
'
The purchaser should keep in mind that it is the level
of clinical need and assessed severity of the problem
that primarily dictates when an individual user of the
EAP will get referred to a more intensive and
specialized provider. This determination can usually be
made after a thorough assessment and one or two
clinical sessions with an EAP counselor. The most
serious cases will get referred out to more appropriate
care (perhaps for clinical psychotherapy, psychiatric
medications, substance treatment, or group therapy,
etc.) before using the maximum number of clinical
EAP visits. Thus, having a higher to the limit of
clinical sessions is most important for those individuals
who are appropriate for receiving brief therapy and
action planning from EAP counselors.
Utilization-Based Pricing
In contrast to the capitation model, the utilization
approach to pricing EAP services is a concept that ties
the EAP’s fee to the level of EAP use. The advantage of
this model for the employer is that it only pays for the
EAP services that it or its employees actually receive. If
utilization is low, the employer pays less. Conversely, if
the EAP handles more cases and provides more services,
the employer will pay more. This pricing model thus
shares the financial risk of the program between the
employer and EAP. It has the disadvantage of being
more difficult to plan ahead for budgeting the cost for
the EAP and it requires well-defined reports of
utilization that both the EAP and the organization trust
as being accurate. Some of the utilization metrics that
should be considered for this kind of pricing include
the (a) number of EAP clinical sessions provided by
telephone; (b) number of EAP clinical sessions
provided in-person; (c) total number of clinical cases
provided; (d) number of management consultations
provided; and (e) other services (e.g., critical incident
support, training events, management consultations,
and so on).
In practice, however, a utilization-based model typically
is structured as two parts and is not purely based on
use. The first part is a base fee that is determined from
a per-employee per-month capitated rate (but one that
is lower than in a full capitated contract) and a second
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part that includes various per-event fees for each clinical
counseling session and/or other specific services.
In this model, the combined PEPM and per visit fee
can result in substantial variability in cost compared to
standard fixed capitated pricing rates that are based on
estimated average utilization. For example, if clinical
utilization is low (1 to 3 percent), then the resulting fee
will be lower; and if clinical utilization is high (6 to 8
percent), then the resulting fee will be higher than the
typical capitated pricing model.
Purchasers interested in this pricing approach need to
recognize that a high level of EAP utilization should
result in higher levels of positive outcomes for the
organization. Thus, higher EAP fees are offset by the
correspondingly higher levels of business return from
greater use of the service (e.g., employee productivity,
absence, health care cost savings, reduced disability
claim costs). The utilization-based pricing model is
built on a belief that EAPs should be judged on
program results and not just on price.
Pay for Performance Pricing
The newest and least commonly used pricing model is
called Pay for Performance (P4P). This approach is
borrowed from the medical care environment and it
provides clinicians and facilities with limited financial
incentives (essentially bonuses) for demonstrating
improved treatment outcomes. P4P arrangements tie
an agreed-upon set of metrics (e.g., quality of care,
patient satisfaction, clinical outcomes) to financial
incentives. The specifics of these programs can vary,
including the clinical areas targeted, the type of sponsor
providing money for the financial incentives, the size of
the incentive, and the formulas used for determining
the incentive amount. P4P models are not full pricing
approaches that cover all of the fees needed to purchase
an EAP. Instead they augment the more basic pricing
model with additional fees that can be earned with
certain behaviors.
In many ways, however, P4P models are affected by the
same concerns that plague utilization-based pricing
models. Generally, there is a lack of accepted methods,
across vendors and program models, for evaluating
performance. For instance, employers that require
"report cards" from their vendors typically ask for
measures that are not important or relevant to
outcomes, such as telephone response times in a call
center or the level of client satisfaction with EAP
counseling. A high performance rating on either of
these measures does not indicate whether the troubled
employee who accessed services actually experienced
improved emotional health or productivity.
Fees at Risk
Conceptually related to P4P, but an opposite fashion, is
the pricing practice of designating certain aspects of
EAP use and operations as performance standards that
must be met by the provider and can benefit the
purchaser financially if they are not achieved during the
course of service delivery. Commonly used operational
metrics for EAPs are the average speed of answer, the
percentage of calls into the service center that are
abandoned before being answered, the average length of
waiting time to see an EAP counselor, and the level of
satisfaction for service users. The EAP provider can
designate some portion of the total contract fee (e.g.,
5%) that is linked to meeting the performance
objectives. Employers increasingly expect to have some
fees “put at risk” in this manner by EAP providers, as
this has become commonplace in the purchasing of
other kinds of employee benefit services. Anecdotal
evidence indicates that most EAPs meet such criteria
for performance. Performance guarantees are thus
financial penalties for poor performance by the EAP
rather than giving additional pay for good performance.
Conclusion
Popular approaches to pricing of EAP services include
the capitated approach – which is the most common,
the utilization-based approach, and the “pay for
performance” approach. Each approach has its merits
and its concerns. The purchaser of EAP services is
advised to consider which kind of pricing is most likely
to create the business incentives that match the goals
for having the employee assistance program.
EASNA Research Notes
, 2010, Vol. 1, No. 6 Attridge et al.
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References
[1] Sharar, D. A., & Hertenstein, E. (2006). Perspectives on
commodity pricing in employee assistance programs (EAPs):
A survey of the EAP field. WorldatWork, First Quarter, 32-
41.
[2] Sharar, D. A., & Masi, D. A. (2006). Crises facing the
EAP field. Journal of Employee Assistance, 36(4),7-9
[3] Burke, J. (2008). Lessons of the “Free” EAPs. Journal of
Employee Assistance, 38(2), 17-18.
[4] Sharar, D. A. (2008). Two isn't always better than one.
Employee Benefit News, 22(10), 38-39.
[5] Jacobson, J. M., & Hosford-Lamb, J. (2008). Working
it out — Social workers in employee assistance. Social Work
Today, 8(2), 18.
[6] Masi, D.A., Jacobson, J.M., & Cooper, A.R. (2000).
Quantifying quality: Findings from clinical reviews. Employee
Assistance Quarterly, 15(4), 1-17.
[7] Kiarreich, S. H., DiGiuseppe, R., & DiMattia, D. J.
(1987). EAPs: Mind over myth: Managers need to rethink
their belief that all EAPs are uniformly effective. Personnel
Administrator, 32(2), 119-124.
Suggested Citation for this Research Note:
Attridge, M., Amaral, T., Bjornson, T., Goplerud, E.,
Herlihy, P., McPherson, T., Paul R., Routledge, S., Sharar,
D., Stephenson, D., & Teems, L. (2010). Pricing options
for EAP services. EASNA Research Notes, Vol. 1, No. 6.
Available online from http://www.easnsa.org. '
... One exception has been the development of accreditation processes for EAP programs that serve as quality standards for operational practices. However, few organizations have invested the time and expense required to become accredited as providers of employee assistance services (Attridge et al., 2010b). ...
... One exception has been the development of accreditation processes for EAP programs that serve as quality standards for operational practices. However, few organizations have invested the time and expense required to become accredited as providers of employee assistance services (Attridge et al., 2010b). ...
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EAPs: Mind over myth: Managers need to rethink their belief that all EAPs are uniformly effective Suggested Citation for this Research Note: Attridge Pricing options for EAP services
  • S H Kiarreich
  • R Digiuseppe
  • D J Dimattia
  • M Amaral
  • T Bjornson
  • T Goplerud
  • E Herlihy
  • P Mcpherson
Kiarreich, S. H., DiGiuseppe, R., & DiMattia, D. J. (1987). EAPs: Mind over myth: Managers need to rethink their belief that all EAPs are uniformly effective. Personnel Administrator, 32(2), 119-124. Suggested Citation for this Research Note: Attridge, M., Amaral, T., Bjornson, T., Goplerud, E., Herlihy, P., McPherson, T., Paul R., Routledge, S., Sharar, D., Stephenson, D., & Teems, L. (2010). Pricing options for EAP services. EASNA Research Notes, Vol. 1, No. 6. Available online from http://www.easnsa.org.
Lessons of the "Free
  • J Burke
Burke, J. (2008). Lessons of the "Free" EAPs. Journal of Employee Assistance, 38(2), 17-18.
EAPs: Mind over myth: Managers need to rethink their belief that all EAPs are uniformly effective
  • S H Kiarreich
  • R Digiuseppe
  • D J Dimattia
Kiarreich, S. H., DiGiuseppe, R., & DiMattia, D. J. (1987). EAPs: Mind over myth: Managers need to rethink their belief that all EAPs are uniformly effective. Personnel Administrator, 32(2), 119-124.
  • D A Masi
  • J M Jacobson
  • Cooper
Masi, D.A., Jacobson, J.M., & Cooper, A.R. (2000).
Pricing options for EAP services
  • M Attridge
  • T Amaral
  • T Bjornson
  • E Goplerud
  • P Herlihy
  • T Mcpherson
  • R Paul
  • S Routledge
  • D Sharar
  • D Stephenson
  • L Teems
Suggested Citation for this Research Note: Attridge, M., Amaral, T., Bjornson, T., Goplerud, E., Herlihy, P., McPherson, T., Paul R., Routledge, S., Sharar, D., Stephenson, D., & Teems, L. (2010). Pricing options for EAP services. EASNA Research Notes, Vol. 1, No. 6. Available online from http://www.easnsa.org.