These Bold Choices Can Help Crush Healthcare Costs

Many employees now have someone they can turn to for healthcare matters.

Since 2017, the National Business Group on Health has noticed a 39% spike in high-touch, on-demand, healthcare concierge services among its estimated 450 members. More than half of these large employers have also integrated support services for medical decisions, says Brian Marcotte, CEO and president of NBGH, a Washington-based organization that addresses national health-policy issues and shares best practices in healthcare management.

Marcotte explains that employees “don’t touch the fragmented or complex healthcare-delivery system with enough frequency” to make independent, informed decisions. Concierge services help cut costs by explaining employee benefits and treatment options, serving as their healthcare advocate when needed and recommending appropriate healthcare providers and facilities.

“Employers have faced reality,” he says. “They’re starting to rethink, simplify and maximize the consumer or employee experience.”

Some HR executives have grown fearless in slashing healthcare costs and improving access to quality care by moving past traditional boundaries. They’re making bold changes that primarily focus on personalization and choice. From creating individualized, narrow provider panels to employees personalizing their benefit plans, the goal is to give employees the right care, at the right time, at the right place–and, now, at the right cost.

Century of Rising Costs

Despite employers’ good intentions, healthcare prices have been climbing for nearly a century.

According to “The U.S. Health Care Non-System, 1908-2008,” published in the American Medical Association’s Journal of Ethics, rising prices can be traced back to the 1920s, when there was a “growing demand for higher-quality standards for physicians and hospitals.” During the ’50s, the price of hospital care doubled. Congress’ creation of Medicare and Medicaid in the next decade accelerated the rate of healthcare inflation, as they adopted “the same reimbursement defects that were found in the private health-insurance industry,” according to the report. Then, health-maintenance organizations came along in the 1970s; although they were designed to control costs, healthcare prices still rose at double the rate of inflation during the next two decades, partially due to new and expensive diagnostic tests and treatments.

Escalating costs have also been compounded by HR executives reluctant to embrace new strategies. Some fear employee backlash, a disruptive transition process or that short-term sacrifices won’t produce long-term gains.

Still, employers may not have much to lose by trying something new.

Consider that other wealthy countries spend, on average, about half as much per person on health than the U.S., according to the Kaiser Family Foundation.

Based on the organization’s 2018 benchmark Employer Health Benefits Survey, annual family premiums for employer-sponsored health insurance rose 5% from the year prior to average $19,616. Annual premiums for single coverage increased 3% to $6,896. On average, covered employees paid 18% of their single coverage and 29% of their family coverage. Since 2008, “average family premiums have increased 55%, twice as fast as workers’ earnings (26%) and three times as fast as inflation (17%),” according to the report.

Hardly modest increases–and it’s not forecasted to slow. Healthcare spending is projected to grow at an average rate of 5.5% per year for the next eight years and reach nearly $6 trillion by 2027, says the Centers for Medicare and Medicaid Services.

Making Headway

One strategy that’s attracting employer attention is pushing out personalized messages to workers, says Marcotte at NBGH. By using claims data and other predictive analytics, third-party vendors identify which employees are more likely to pursue surgery or specific treatments and then email them available benefits information, such as about medical-decision-support services.

“It makes sure people take advantage of their benefits and makes healthcare more affordable by steering people to high-quality, efficient providers and sites of care,” he says, adding that an employer can see big savings when employees visit an urgent-care center rather than a hospital emergency room, or an infusion center instead of a hospital for specialty-drug administration. “[Employees] are making decisions on what’s best for them and not getting surgery for the sake of surgery.”

Virtual systems are also growing in popularity, eliminating the need for employees to directly call a vendor or try to figure out a healthcare issue on their own. For instance, take employees who are searching for an orthopedic specialist. While dozens may be available in their network, Marcotte says, a virtual system automates and simplifies the selection process by identifying several high-quality and efficient specialists based on individual need and location. It helps steer employees to quality providers so they can make better decisions about where to go for care. Marcotte adds that this approach takes the mystery out of accessing a broad network that may include hundreds or even thousands of providers. Some concierge services are also taking a next step and scheduling employee appointments.

Other employers support centers of excellence that teach employees what questions to ask providers, explain treatment options and provide recommendations for the best location for surgery. Since purchasing healthcare services is not routine for the average person, Marcotte believes these offerings are proving valuable.

So is contracting directly with healthcare providers, especially for large employers that can take advantage of their size to reduce costs. Marcotte says the number of NBGH members applying this strategy has almost quadrupled from 3% in 2018 to 11% this year.

Fewer But Better Choices

Although not as popular as other approaches, some organizations are developing narrow provider networks.

“That doesn’t mean restricting access,” says Howard Forman, a professor in the department of economics and schools of medicine, management and public health at Yale University. “Narrow panels don’t give employees as much choice but better choice by having them access providers who are as or more effective as others at lower costs.”

For example, consider a broad provider network that includes 10 orthopedic surgeons. A narrow network may only recommend three. In order for other surgeons in the broader network to be included in the narrow network, they must compete by reducing their price while delivering quality services.

Unfortunately, the adoption of narrow networks has been slow, Forman says, citing employee friction as the reason. HR professionals believe employees will complain about why they can’t access a specialist or specific hospital. Effectuating positive change isn’t easy, he says. Sometimes employers must climb a steep hill to get to the other side.

Whatever strategy is employed, Forman suggests creating employee groups to help HR change the healthcare-spending habits of all workers, not just those who spend the most healthcare dollars.

“Get them to come to the conclusion that it’s in their self-interest to have narrow panels because it will decrease their out-of-pocket costs,” he says. “Tell them, €˜We’re looking at you to help us lower long-term, out-of-pocket spending for employees by 10% to 20% without increasing employer spending. You’ll have the greatest chance of success if you pass on 100% of savings to employees during the initial years and take advantage of the savings you accrue after that.’ ”

Bargain Shopping

Since 2011, California Public Employees’ Retirement System (Calpers) has saved more than $8 million a year with “reference pricing,” an approach that targets its 235,000 non-Medicare PPO members.

Individuals are offered a fixed payment for a range of hospital surgeries or procedures, such as hip replacement or cataract-removal surgery, which encourages them to shop around. For example, if Calpers pays $40,000 for a hip replacement but employees choose a hospital that charges $50,000 for the procedure, members are responsible for paying the $10,000 difference along with a 20% copay (up to $3,000).

Not surprisingly, members have gravitated toward lower-priced healthcare facilities. The approach also produced an unexpected benefit: Those who had a hip or knee replacement at a reference-pricing facility experienced a significantly lower general-complication rate and infection rate within 30 days of their stay, according to Calpers.

However, there are other factors to consider, such as that some fees can’t be negotiated, including those provided in the emergency room. Employees must also be willing to utilize lower-priced healthcare facilities, be armed with accurate price and quality information and, lastly, develop the ability to comparison shop, which excludes workers with emotional or cognitive impairments.

Great Expectations

Looking ahead, employers can anticipate more direct-to-consumer healthcare offerings, which can also produce cost savings.

One example is 98point6, an on-demand, text-based, primary-care service. Employees nationwide pay an introductory rate of $20 the first year and then $120 annually for personalized consultation, diagnosis and treatment.

“Employees might use a service like this because it’s very convenient and they know exactly what it’s going to cost them,” says Kate Brown, leader at Mercer’s Center for Healthcare Innovation in Houston. She asks, if insured employees are willing to spend their own money on such services, then why do employers need to include them in their health plan at an additional cost to the employer?

Within the next two years, she believes, employees will interact with artificial-intelligence chatbots that cut costs by triaging medical conditions, answering questions about symptoms, informing them about available programs and benefits, and recommending appropriate healthcare providers.

Brown says these virtual concierges will be “inherently valuable.” According to a recent survey conducted by, 89% of respondents Google their symptoms before going to see their doctor; of those, 63% want to know how serious their symptoms are, and 32% do so because they don’t have the time or money to go to the doctor’s office.

“AI chatbots create a really natural and easy-to-follow process that is missing from benefits today,” says Brown. “It’s very prescriptive about what the employee needs to do and how they can do it.”

Other companies have begun translating quality indicators into data that can be used by employees when shopping for healthcare providers. Nowadays, she says, many employers simply post healthcare-related documents like questions to ask a new doctor on their website. But AI goes much further. It can serve those same documents to employees in real time, exactly when needed, instead of relying on them to remember the information months or even years later when seeking medical services.

Over the past several years, a handful of employers have started gathering healthcare data on each employee to identify what healthcare services would be the most impactful for them and then use that data to promote specific types of benefits or programs to them.

While this personalization process is in its infancy, Brown says, companies are also exploring ways to build employee benefits on a one-to-one basis, rather than offer the same health plan to their entire workforce.

“Employees can turn coverage on or off for specific conditions based on individual needs,” she says, explaining that individuals can save money by selecting benefits that reflect their age, health status and lifestyle.

Although healthcare benefits are not yet “super-personalized,” Brown says that employees will push employers in the direction of choice and personalization.

Until then, she says, HR professionals can continue cutting healthcare costs by observing one key rule: “Be open to new ideas.”

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Carol Patton
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