Have you ever been walking behind a parent and their kid and the kid is like four rounds into the “Why” game? Why did he miss the field goal? Well, because sometimes the end-of-game pressure.. Why? And the timeout right before adds to it… Why?
Eventually the parent breaks down and replies, “Because that’s Chicago sports, alright! Now let’s get some ice cream.”
For this post, I wanted to recreate the Why game but for healthcare. Ask a bunch of simple questions that far too often are met with confusing jargon-heavy answers. Today we’re lucky to have Brian Uhlig of the Alera Group providing the answers that are easy to follow, down-to-earth, and can help your organization save money – while still providing high quality care to your employees.
Every year, I expect my Netflix bill to go up a little bit. Same with my Metra card. Isn’t Healthcare this same idea… but on steroids? As an organization, shouldn’t I just expect $15,000 to become $18,000 to become $21,000? These increases are just par for the course, yeah?
Annual benefits price increases have become par for the course, but they don’t have to be. According the Kaiser Family Foundation, the average cost of employer-sponsored health coverage is nearly $20,000 for a family plan this year—a five percent increase from last year —and looking to 2019, employers expect another five percent increase. I regularly hear of employers receiving rate increases of 20 percent and even much higher.
The fact you mentioned Netflix tells me that you’ve “cut the cord” with cable. You made an actual choice to leave the traditional system and move to another option for your entertainment. Those choices have been hard to find in healthcare. It’s important to note that unlike your cable bill, you don’t see the entire cost in healthcare and certainly not until after services are rendered.
We know that overall utilization of services (hospital stays, outpatient surgeries, doctor visits, etc.) have remained relatively flat, but the prices for those services continue to increase at a much greater rate than inflation. Why? Because the actual payer of the service (you and your employer) aren’t the ones negotiating the deals. Employers who are working with the traditional benefit broker have been “trained” to simply accept the 4-7 percent increases each year because that’s what everyone else is getting.
The good news is, it doesn’t have to be this way. Employers can save thousands and reject the status quo increases we have become used to every year.
When I see statistics like employers are paying nearly $20,000 per employee per year, I’m not sure I understand what that means? For example, as an employee I’m thinking, ok, I spend $150 a paycheck on premiums, or maybe the company chips in a thousand toward my HSA, but where does that $15,000 number come from?
I think the $20,000 per employee per year (PEPY) number is a bit inflated. Here are a couple of simple facts. On average, 1 percent of your population is responsible for 40 percent of your total spend and that 1 percent tends to be different each and every year. So we aren’t surprised when employees are confused on why healthcare costs as much as it does since the majority spend less than $1,000 per year out of their pocket.
A fairly typical figure used in the industry is that employers spend approximately $10,000 PEPY and of that $10,000, they will have employees contribute roughly 30 percent in payroll contributions. The figure that is missed is the employee out-of-pocket costs that are above and beyond the $10,000. That amount is typically another $1,500-$2,000 PEPY.
What can an organization do to try and prevent a major increase each year?
If employers want to provide better benefits at lower costs they should consider doing the following:
- Evaluate their current broker/consulting relationship. If your current broker does not have a 3-5 year plan to either reduce or keep costs flat then it’s time to find a new partner.
- That 3-5 year plan should utilize a true third-party administrator (TPA) that will provide full access to their data—giving employers the ability to audit their claims—and complete transparency on how the TPA is paid. To share risk and lower funding costs, the plan should also include stop-loss coverage, ideally through the use of a captive program where the employer becomes the “insurer” and keeps any cost savings.
- Implement the various components of a high-performance health plan, including plan designs that encourage use of high-value providers (measuring not just costs but outcomes) at a very low cost to employees to encourage utilization.
How do you get employees engaged during Open Enrollment? And, let’s say Open Enrollment is successful, how do you keep up with them during the year to get important messages across?
There is a common misconception that open enrollment is the only time of year to educate employees. Employers should have an expectation that their consultant has a plan to educate employees year-round. There should be, at a minimum, quarterly communications on how to use the plans efficiently. The reality is that no matter how often or impressive the communications are, nothing works better than having a primary care physician employees can work closely with, and/or having a personal health concierge to help the employee navigate the system once they begin their healthcare journey.
With thousands of employees, all in different situations, different health needs, wouldn’t it make sense to have several medical plans to choose from? More options = better care?
We do believe it makes sense to give employees a few choices on what type of health plan they feel is best for their family. We also are working with our clients to build choices WITHIN each plan design. We do that through tiered networks, providers who have agreed to bundled pricing arrangements and centers of excellence all being available to the employee within their existing plan choice with different cost sharing arrangements.
Think of the choices individuals have when buying an airplane ticket. Every person is going to the same place but some have paid for extra legroom, or maybe a window seat or the ability to bring an extra bag. We know we can provide the same flexibility with healthcare.
What are common areas where employees are spending more than they should and might not know it?
This is actually a really important question and it’s based on the common misconception that “more healthcare is better healthcare.” Don’t take my word for it—the Washington Health Alliance conducted an analysis of claims in the state of Washington and determined nearly $282 million dollars was spent (wasted) on low-value treatments or procedures. Some of those treatments and procedures are listed below:
- Opiates prescribed for low back pain.
- Annual EKGs and other cardiac screening for low-risk individuals.
- Eye-imaging tests for patients without significant eye disease.
- Preoperative tests and lab studies before low-risk surgery for low-risk individuals.
- Too frequent screening for cervical and prostate cancer and vitamin D deficiency.
Let’s say an organization can get healthcare right, first off, what does “getting it right” look like? What type of value can this bring both for the company’s bottom line and what employees are spending?
I worked with National Surgical Healthcare, a multi-location surgery provider, to go from multiple fully insured or self-funded plans across multiple states to a single self-insured plan. Over five years, their costs went up just 1 percent per year—even as they decreased employee payroll contributions—leading to $3 million in annual cost savings against the trend they were on.
At the end of the day, it’s all about value. The only way we’re going to see progress is by sending employees to providers who deliver better care at an equivalent or better price. Smart employers are demanding transparency from their vendors to ensure there is value in every dollar they spend.
Some great examples of successful plan changes would be:
- Increasing member attention to where and how to spend plan assets by communicating to members year-round, not just during open enrollment.
- Optimizing various levers for managing costs, such as network limitations for high-cost areas like dialysis, PBM carve outs, dependent audits, spousal surcharges/exclusions, high-performing networks and ongoing data analysis to regularly identify new opportunities.
Brian Uhlig serves as Senior Vice President of the Alera Group based here in Chicago. If you lead the benefits at your organization and are looking for ways to contain costs or reduce future costs, feel free to reach out to Brian via LinkedIn or Alera Group website. You can also reach out to me (Chris O’Brien) and I can facilitate an introduction. Hope this was helpful!