Why Combining Strategies Can Reduce Your Healthcare Spend

New research finds employers are seeking other ways to mitigate costs beyond plan-design changes.
By: | November 20, 2018 • 3 min read
reducing healthcare spend

Employers can breathe (a little) easier about dealing with next year’s healthcare costs. According to a new actuarial analysis by Aon, a global professional-services firm, 2019 premiums for medical and pharmacy plans are expected to increase by 3.5 percent, the same as this year.

“We see employers really attacking the healthcare problem,” says Stephen Caulk, a senior vice president at Aon. “While some employers are focusing on plan-design changes, our data shows that that the pace has slowed from prior years, and they’re moving toward other ways to mitigate costs.

As examples, he points to employers that are providing workers with data and insights that offer more transparency in the healthcare-delivery system, so they can make smart decisions based on both cost and quality factors. Others are adopting Center of Excellence strategies for high-cost treatments or surgeries; implementing programs that help employees better manage chronic conditions; developing a pharmacy coalition; and offering integrated delivery models like accountable care organizations to improve care-delivery effectiveness.

Collectively, Caulk says, these strategies can meaningfully impact costs, as well as enable organizations to engage with community providers to negotiate better prices and enhance quality of care.

“There is no one-size-fits-all solution,” explains Caulk. “You have to constantly evaluate the shifting landscape and consider that what’s working now may not work in the future. Evaluate where you’re at, what’s driving your costs and how you can improve on opportunities.”

Advertisement




In the near future, he says, HR professionals will especially be challenged by new therapies, such as gene therapy or personalized medicine, a model that separates people into different groups and treats them based on predicted response or risk of disease. With such novel—and expensive—treatments now coming available, how do you stabilize healthcare costs that can climb into the millions over an employee’s lifetime?

Meanwhile, employers are exploring all options for mitigating healthcare costs. Based on the results of the Large Employers’ 2019 Health Care Strategy and Plan Design Survey conducted by the National Business Group on Health, 23 percent of the 170 respondents currently purchase their drugs through a purchasing coalition. Also, more are offering concierge services to help people navigate the complex healthcare system, says Brian Marcotte, president and CEO at NBGH.

More changes involve full replacement of consumer-directed health plans. While 39 percent of large employers currently offer them, he says, that number will shrink to 30 percent in 2019, partly due to low unemployment and the war for talent.

As employers move away from plan-design changes and focus more on delivery systems to curb costs, negotiating with health systems can be another option for employers.

“When health systems negotiate with health insurers, they think they’re negotiating with a big, bad health-insurance company,” Marcotte says. “To have an employer sit across the table and look at a provider in the community in the eye, [it] creates a different dynamic. By talking about some of their challenges with healthcare, they’re making it real for the health system, which is one of the most powerful things employers can do.”

Likewise, virtual tools or services will form the next major wave—or perhaps tsunami— in healthcare delivery. More than half of survey participants—51 percent—identified implementing more virtual-care solutions as their top healthcare initiative next year.

“If virtual care is not part of your healthcare strategy, your healthcare strategy is not complete today,” says Marcotte. “Virtual care is growing in emotional- and behavioral-health services, in condition management like diabetes, musculoskeletal and physical therapy, which bring more convenience and access and improve the employee experience around demand services.”

Advertisement




However, the utilization rate of virtual care is low, hovering around 9 percent, mainly because employees aren’t comfortable with it yet, says Tracy Watts, senior partner in Mercer’s healthcare business.

But usage for one of the global consulting firm’s clients is approaching 20 percent. The company offered three free telemedicine visits to employees in its PPO plan, who then internally promoted its convenience, which drove up usage, she says.

Other growth areas include purchasing enhanced services to detect and eliminate fraud, waste and abuse. Based on responses to the Mercer National Survey of Employer-Sponsored Health Plans 2018, 6 percent of midsized and large employers and 18 percent of those with 20,000 or more workers have taken this step, while many more are considering it.

“There are stats that say the amount of expenses associated with fraud, waste and abuse can be as high as 30 percent of medical claims,” says Watts.

The survey also revealed that the average total health-benefit cost per employee is expected to climb to 4.4 percent in 2019, partly due to the estimated 50 new specialty drugs hitting the market each year over the next five years. Moving forward, she says, prescription drugs will continue to be a major driver for escalating costs.

“HR has been working really hard at not just managing or shifting costs, but helping people be healthier while driving lower costs and delivering better value,” Watts says. “At a time when the labor market is so tight, anything employers can do to create more awareness and help people live their lives better is what a culture of health is all about.”

Carol Patton is a contributing editor for HRE who also writes HR articles and columns for business and education magazines. She can be reached at [email protected]

More from HRE