Employers can immediately reduce the cost of health insurance by 20% by simply shifting their focus to proven strategies…..
If Not Now, When? What Employers Need to Know in Order To Manage Health Costs
Published on August 1, 2017
Control Your Destiny
Common sense is not always that common in our health care system. We have the best doctors in the world and the best medical technology in the world. Why don’t we have the best health care system in the world? Why is health insurance so expensive? What can employers do about it?
Employers can immediately reduce the cost of health insurance by 20% by simply shifting their focus to proven strategies.
- Stop focusing exclusively on large “PPO” provider networks and pay attention to networks with high performing primary care physicians.
- Stop focusing on hospital net discounts off billed charges and start demanding payments based on a reasonable percentage of Medicare.
- Stop focusing on historical cost reports and require your insurance carrier or third party administrator (TPA) to deliver predictive and actionable population health analytics.
Care Management
Chronic care conditions account for two-thirds of the total health care costs. Employers who want to manage these costs need to drive engagement between employees and their primary care clinicians.
People trust their physician/clinician, not the insurance carrier. Relying on the insurance carrier to manage population health is a 30-year-old strategy with mediocre results. Whereas, patient engagement rates are shown to be much higher when employees are driven towards primary care physicians that are “PCMH Recognized” by NCQA. Additionally, when physicians are given authority to manage care, patients benefit from easier access to care because these PCPs have extended office hours and provide same day access to care, and better quality care because they follow evidence-based clinical guidelines.
Hospital Costs
Hospital unit cost also has a substantial impact on overall health insurance rates. Hospitals mark up prices by more than 450%. In other words, hospitals will charge private payers $4,500 for the same service that Medicare is charged $1,000.
Even with a 50% negotiated discount, employers can still end up paying more than twice that of what Medicare analysis determines to be the actual cost. This is substantially higher than necessary given a MedPac report that shows efficiently run hospitals generate a net operating margin from the Medicare reimbursement rate. In other words, there is no justification for hospitals to charge substantially higher rates to employers in order to offset the low payment from Medicare.
Meaningful Insights
The industry standard for employer client reports and analytics has also not changed during the past 30 years. Analyzing historical medical cost based on type and place of service does not provide actionable recommendations, and simply leads to cost shifting through higher monthly premiums and higher deductibles.
How do you know physicians are delivering on their commitment to manage patients with chronic care conditions unless you are receiving population health management reports from your insurance carrier/TPA? Basic questions such as “what % of my employees/family members with diabetes have a blood sugar level (HbA1c) below 7%” are key to holding the physicians accountable. Moving from a “place of service” report to an integrated “wellness and population health” analytics focus is the key to determining meaningful actions necessary to manage the per capita cost.
Questions to ask your medical benefits consultant:
- What % of the network PCPs are NCQH-PCMH Recognized? A high performance network will have at least half the PCPs in this category with the majority of the remaining PCPs pursuing this designation.
- What % of the network PCPs are reimbursed based on keeping people healthy? A high performance network will have a specific value-based reimbursement model in place for PCPs.
- What’s the hospital reimbursement as a % of Medicare? A high performance network will have hospitals contracted at a net effective rate of 150% of Medicare or less.
- What population health reporting is provided by the carrier/TPA? A high performance carrier/TPA can provide biometric results and risk scores by member, chronic care registries, and specific outcomes results by chronic care patient and attributed PCP/clinician.
Why spend 20% more for health insurance by continuing with the current 30-year-old status-quo approach?
Now is the time for employers to be bold and make a difference. Now is the time for employers to “own” this on behalf of their employees and stop making passive status quo decisions.
If not now, when?
After graduating with a BSBA in Statistics, Tom went on to become the Director of Actuarial and Underwriting for a local non-profit Blues Plan. He subsequently held executive leadership positions at United Health, Cigna and Aetna. Tom consults with Accountable Care Organizations in his current role as Senior Vice President with Continental Benefits and remains focused on the health care triple aim of better population health, better patient experience, and a better per capita cost.
Reach Tom at: tdameron@continentalbenefits.com
