Thought-Leaders newsletter

Perspectives on a selected key topic August/ September 2018

as employer demand for increased member cost sharing finally peaked, and what will happen in this arena over the next few years?”

Kevin Sears
Director
BDC Advisors

A Growing Number of Large Employers Will Play Activist Role in Disrupting Health Care Delivery System and Supporting New Models of Care.

While high deductible health plans will continue to be popular and even grow over the next few years, the most significant change occurring in the commercial market segment is the new activist role large employers are planning to play in disrupting the healthcare delivery and financing system, and supporting new models of care.

In 2019 nearly half of all large employers plan to drive changes in the health care delivery system directly or through their health plans, by leveraging digital solutions, or both according to a new National Business Group on Health Survey of 170 large corporations which offer coverage to 19 million employees and their dependents. Large employers are frustrated by the failure of traditional cost sharing mechanisms to curb healthcare inflation, and are embracing innovations aimed at strengthening their workforce well-being and productivity, while also testing new ways to reign in health care costs. Implementing more virtual telehealth solutions, for instance, will be the top healthcare initiative for many corporations in the coming year and was barely on their radar a few years ago. The use of virtual care as part of employee health is branching out well-beyond physician consultations to include areas such as remote monitoring, condition management, physical therapy, and cognitive behavioral therapy. Perhaps because of the growing interest in consumer technology, over 70% of employers believe new startup entrants from outside the traditional provider market will be needed to disrupt the current delivery system, and provide lower cost more accessible prevention and primary care.

High Deductible Health Plans (HDHPs) which hold consumers and health plans responsible for resource utilization, of course, have grown steadily in the past five years, a trend that is likely to continue in 2019. Over 70% of large employers now offer HDHPs, and the projections are that by 2022 over 90% of all employer sponsored insurance will offer HDHPs. Interestingly, the availability of Consumer Directed Health Plans (CDHPs) which use high deductibles coupled with tax advantaged savings accounts, may actually shrink from approximately 39% of employers offering them as an option now to 30% in 2019.

We expect there will be expanded employer support for the implementation of alternative payment and delivery models such as ACOs, High Performance Networks and Centers of Excellence. Intel, Boeing, and Walmart, and Lowe’s have pioneered direct, total cost of care and bundled payment provider agreements over the past five years. This approach appears to be taking hold. Direct contracting between large employers and health systems and providers will increase from 3% in 2018 to 11% in 2019 according the NBGH survey as result of large employers increasing frustrations working through their existing third part administrators. Employers are also sharply increasing their use of Centers of Excellence for select tertiary and quaternary services which will grow from 12% of large employers in 2018 to 18% in 2019. Many of these agreement include fixed bundled payment pricing and guarantees.

While CMS Administrator Seema Verma’s announcement of major changes in the Medicare Shared Savings Program received most of the attention this month, the growing activism of employers may have more long term significance for the health care market, affecting more lives and more dollars. We would not be surprised if the health care delivery and financing system of the future may be hatched and shaped outside of Washington and the provider world, and in the Fortune 500 C-Suites, Board rooms, and HR Departments.

Mark Lutes
Chair of the firm’s Board of Directors, Epstein, Becker & Green

Kaiser Family Foundation (“KFF”) recently reported that, during the 10 year period 2006-2016, average payments for deducible and coinsurance among people with large employer coverage rose considerably faster than the total cost for covered benefits. Indeed, average deductibles increased from $303 to over $1,200. KFF also found that deductible now account for almost half of total cost-sharing (deductibles, copayments and coinsurance) up from less than 30% ten years before.

Is the high (HDHP) or higher deductible tool having a beneficial impact and will employers continue to adjust deductibles to accomplish health plan goals? An October 2017 meta analysis of twenty-eight studies published in Health Affairs finds the track record of high deductible health plans to be mixed. Eight of twelve studies reported a significant reduction in use of preventive services among HDHP beneficiaries. Both of the studies that looked at diagnostic testing reported lower utilization among HDHP beneficiaries. Thirteen studies reported significant reduction in medication adherence.

We also hear anecdotally that large employers believe that the HDHP lever has little play left in it. Many apparently would welcome alternative or at least supplemental tools. My belief is that, given these conditions, large employer plans will incent their beneficiaries by removing deductible barriers to those beneficiaries accessing care from provider groups and networks that provide a range of procedural and chronic bundles below a plan established reference price.

Employer plans have a material opportunity for savings through direct contracts with providers. Opportunities exist around key procedural (orthopedic, GI, cardiology and maternity) episodes. They also exist around key chronic conditions (COPD, diabetes CHF to name a few) that drive cost and for which outcome improvements would be welcome.

Today, the leading vendors/conveners for the Medicare BPCI program are ready to turn their attention to producing savings and higher outcomes for the self-funded market. They will soon bring their contracting and episode administration prowess to bear in this part of the commercial market. The market will materialize as they learn to solve certain plan design challenges and power their solutions with advanced beneficiary education and engagement tools.

Lindsay R. Resnick
Executive Vice President
Wunderman Health

Over 150 million Americans get their health insurance from their employer. More than 40% are enrolled in a high deductible health plan (HDHP)…ten years ago it was fewer than 15%. In the Individual marketplace, HDHPs are the norm. At a time when one-in-three Americans say healthcare is their biggest financial burden, plans with employee cost shifting have gone mainstream…and they’re not going away.

It wasn’t long ago that health insurers collected a majority of premium dollars from people who had group health coverage through their job. But now, by growing their stake in government health care programs―Medicare, Medicaid and ACA―we’ve seen employer premiums represent a much smaller share of total revenue over the past decade. This direct-to-consumer market trend will continue.

Healthcare’s shifting financial burden is forcing consumers to take a close look at their family budget. A quarter of Americans have avoided, postponed or refused medical treatment because of cost. The good news: out-of-pocket responsibilities are fueling the healthcare consumerism movement. Once consumers are responsible for spending health dollars out of their own wallet you have their attention. However, buying healthcare services—from insurance to prescription drugs to routine check-ups to MRIs—isn’t easy given health literacy disparities, providers’ control of resources, and inconsistent access to consumer-centric information.

Being a smart healthcare shopper able to make confident, value-based choices challenges every American. We’ve seen this with consumers’ reluctance to question their physician about cost or site of care. For example recent research on MRI scans, one of the easiest services to price compare, shows that if consumers shopped local MRI sites, price variation is significant and savings would be substantial. However, doctors’ suggestions proved to carry more weight with patients than the potential for savings, with most doctors referring to only a single MRI provider (often the higher-priced option operated by their affiliated hospital).

The retailization of healthcare is here to stay. A retail mindset means consumers compare products and services, ask friends, read and publish reviews, price check, and quickly cast aside brand loyalty for a better deal. Shopping for healthcare may not follow a traditional retail path-to-purchase, but for most Americans it’s one of the most important buying decisions they make. That’s where health care companies AND employers can play a critical role: create reliable, understandable information and decision support tools to help consumers and employees navigate healthcare’s massive maze of bureaucracy. Turn employees into savvy customers. Replace consumer healthcare insecurity with healthcare confidence.

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