Employers Seek Ways to Control Rising Health Care Costs

In 2016, health care costs were expected to grow 6.5 percent, far more than inflation. While not as great as in some years, this burgeoning financial responsibility has much of the business community vigorously searching for solutions to keep health care costs in check. While many employers are utilizing tactics like higher deductible plans or increased co-payments, some companies are investing in strategies that cut costs at the source. According to consulting firm Willis Towers Watson, almost 45 percent of employers with a thousand or more employees are granting employees access to health care centers of excellence (COEs), organizations that have high care quality ratings. This is a marked increase from the previous year when only 37 percent of large companies utilized COEs. In the same survey, an additional 32 percent of respondents stated that they will include COEs in their coverage networks by 2018.  However, few employers are incenting employees to use COEs, with 17 percent offering employee cost-sharing.  More than half of respondents said they could integrate cost-sharing by 2018. This interest from Big Business is driving change in some parts of the health care sector.  As companies like Lowe’s Cos, General Electric and Wal-Mart partner with health care organizations to implement COEs, there is heightened interest in these types of quality-driven programs. The National Business Group on Health predicts that there will be a 6 percent increase in the number of COEs in 2017. Another increasingly popular strategy to limit point-of-care costs is to narrow networks to only include high quality providers.  These “high performance networks” are now being offered by 20 percent of large companies, compared to only 11 percent in 2015.  Additionally, 39 percent of those surveyed are considering high performance networks in the next three years. In some cases, high performance networks may offer a 15 to 20 percent reduction in cost compared to larger networks. This lower cost is due in part to a smaller group of providers who are promised a greater share of referrals. Furthermore, payors only contract with providers who are on the lower end of the cost spectrum, allowing them to make up profits through patient volume.  The point-of-care discount is also enhanced by the superior clinical outcomes and safer practices founded on optimal, evidence-based methodologies. While there is potentially a large financial benefit to employing high performance networks, continuing adoption will also require an overhaul of how payors operate.  There may be some push-back from providers not included in such “elite” networks.  Furthermore, there may additional scrutiny from regulators, consumer advocates and trade organizations.  The future of employer-based insurance is uncertain. According to S&P Capital IQ Global Markets Intelligence, by 2020, almost 90 percent of employees will obtain health coverage through individual plans.  Ezekiel Emanuel, a key advisor to President Obama during the formulation of ACA, has said that only a handful of private sector employers will offer health insurance by 2025.  While these predictions are contingent upon a large-scale, publicly funded insurance program, there is little doubt that the business community is eager to hand off health coverage responsibilities.

Article written by: Robert Moghim, M.D. – CEO, Moghim Medical Consulting, Inc.

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