Our recent articles, Will healthcare costs continue to rise even if widespread inflation eases? and Will general inflation spread to healthcare costs?, highlighted many reasons why we can expect healthcare costs to remain stubbornly high for the next year or two. Cost shifting is not a tenable option as employee out-of-pocket costs and affordability become significant concerns. Cost management is a critical component of a plan sponsor’s strategy, and innovations in healthcare delivery can help to address these issues. What are the best options to shrink total healthcare costs?
There are two ways to influence care in the U.S. healthcare system: at the point of care (when members use their benefits to address a healthcare need) or at the point of enrollment (when employees (and any dependents they cover) first elect coverage at open enrollment). Both are important in designing a healthcare strategy, with the goal to lower costs, improve quality and enhance the member experience. How an employer approaches the overall strategy is influenced by cost drivers, demographics, philosophy, and geography.
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Point-of-care strategies incorporate many potential solutions, including value-based care arrangements and concierge services. The highest healthcare expenses for most employers are in orthopedic, cancer, cardiac and gastrointestinal categories, much of which can be steered to higher quality providers and/or to value-based/bundled payment models. Centers of excellence (COEs) that offer bundled payments and lower out-of-pocket costs for members can truly impact care. When partnered with concierge services, COEs can achieve the three aims of lower costs, improved quality, and better member experience.
Point-of-care solutions can take many forms, including condition-specific point solutions, on-site or near-site clinics and virtual care. Influencing healthcare at the point of care is challenging, and plan sponsors often struggle with low utilization of potentially impactful solutions. Communication – and increasingly technology-based interventions – are critical to their success, and patience is often needed to see the benefits and to measure the value of the investment.
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Broad networks are one of the most significant drivers of high costs in the healthcare system. The broad network creates an illusion of competition between health systems, but in reality, there is little to no incentive to compete on price, quality or efficiency. To drive down prices and improve quality, employers and innovators need to create true competition in the market. One way to do that is through health system-based high-performance networks. When systems are forced to compete for enrollment based on efficiency, costs will fall.
Employers have driven down costs in select markets by introducing high-performance networks and direct contracts. Such a strategy should be replicated in other major competitive markets. These point-of-enrollment solutions are more prevalent today than in the last few decades and can be accessed through major carriers, carve-out third-party administrators, and direct health system relationships. We may finally see healthcare costs fall when members make enrollment choices based on the health system and not the deductible or out-of-pocket limits.
What is the right option for me?
As an employer, you need to think about two potential strategies: a curated broad-network strategy and a high-performance network strategy:
A curated-broad-network strategy is built on a broad network paired with a high-deductible design and targeted programs and interventions that drive effective decision making. Members are guided at the point of care using creative solutions such as COEs, concierge/navigation services, clinics, and virtual care. This strategy is geared to the low-utilizers or the high earners looking for the HSA account tax benefits. This strategy is also critical in rural markets or urban markets where health system competition is limited. Linking the broad network to a higher deductible and a higher out-of-pocket maximum is important to incentivize members to seek more efficient care.
A high-performance network strategy is the point-of-enrollment solution. Paired with a lower deductible and affordable co-pays, it is designed for the higher utilizers and those with less disposable income. Costs can be more predictable for the member and the higher risk population is enrolled in a high quality and integrated health system, often paired with a high-value primary care focus. This solution utilizes an enclosed, clinically integrated network, with no out-of-network benefit and ideally a primary-care physician relationship. Often described as the “managed-care” plan, the health system is ideally held accountable for the care delivered through defined risk-sharing arrangements.
Employers have the leverage to drive change and to drive the conversation. Disruption should no longer be considered to have a negative connotation and should be seen as clearly necessary for improvements. The status quo is the riskier choice for employers in the current environment. Without change, employers stand to bear the brunt of increasing costs and declining quality. Select large employers are beginning to act and others are sure to follow.
