Innovative Healthcare Teams Updates

Employers: Pay the premiums and control market share

by Dr. Dave Bowers & Michelle Burris

After payroll, health care costs make up one of the largest expenses in employer budgets. Over the most recent 10-year period, health care cost inflation has typically ranged from 4.5—6.0%, with 2 years of 8—9% inflation. Employers are under escalating pressure to maintain stable premiums for employees while simultaneously facing significant annual increases in health care insurance premiums from the payers. However, employer benefit plan re-designs are moving toward higher deductibles and co-pays.

Unfortunately, there is an emerging unintended consequence of increasing out-of-pocket health care costs to the employees. Employees are now more likely to delay necessary care–even preventive care services, which are the most cost-effective health care expense. For every $1 spent for preventive / wellness screenings, the savings is $6 in future health care costs while achieving better clinical outcomes. Preventive care provides the most value because potential catastrophic health events can be avoided.

Some employers have recognized this dilemma and have redesigned their health benefits plan to provide first dollar coverage for preventative services such as annual wellness visits and physicals, annual mammograms for women 40+, colonoscopies for anyone 50+, etc. However, this may not address the immediate premium expense issue the employers face.

Another solution for employers regarding cost reduction, which is a more immediate solution, is reducing the actual total cost of the health care that their beneficiaries currently incur.

There are many discussions, forums and articles in health care today that discuss care delivery, volume versus value, ACO’s, etc, which typically include health systems or hospitals and commercial payers. Which stakeholder is missing from these strategic discussions between providers and insurers? The employer—who pays the bulk of the premiums and makes the benefit plan design decisions for their members / patients for whom the health care industry provides care. Employers have a position of strength and need to be included in discussions with providers and insurers.

There are examples across the country of successful shared-risk agreements between these three major stakeholders. The goal of shared risk agreements is to approve upon the baseline outcomes for quality and employers’ costs for beneficiaries. Agreements contain defined metrics for quality and cost improvement. If the metrics are achieved, all parties share in the savings. When unsuccessful, the health system must contribute a portion of the higher costs back to the employer. Over time, successful shared-risk agreements provide the opportunity for a gradual progression toward direct contracting between employer groups and provider groups, allowing for greater opportunities to improve care and reduce unnecessary costs.

Employers have the ability to control health care market share through effective benefit design structure. In general, health systems have an operating margin between 2 – 3%. Innovative Healthcare Teams’ experience suggests that a shift of only 5,000 covered lives from one health system to a competing one can significantly impact the market share and operating margins of health systems.

Health systems who successfully engage with employers to collaboratively reduce employers’ health care expenses will be rewarded with increased market share. Health systems who aren’t able to deliver value could face potential reduction of their patient base and loss of market share to provider groups who can deliver value based care.

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