Employer health plans: Strategies beyond an ACA response

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By Daniel F. Bostedt | 11 May 2015

Employer health plan sponsors have been very busy the last few years with Patient Protection and Affordable Care Act (ACA) requirements, related plan change implementations, and preparing for the Cadillac tax in 2018. There has been little time to think about a strategy that goes beyond an ACA response.

The preparation of a new multiyear benefit strategy may require as much or more effort than the ACA has consumed. That is why proactive employers are starting to develop timelines for creating their next multiyear strategic plan. They realize that continuing to rely on cost shifting to employees is not a long-term solution.

The healthcare marketplace, resources, and employer philosophies have been changing as a result of the ACA and will continue to do so. High-deductible health plans, narrower networks, direct contracting, electronic education, and participant decision-making platforms are becoming more popular. The key is to understand those changes and look for opportunities in this new world of healthcare, so the next multiyear strategic plan is not mired in a historical approach.

As we look at the evolving healthcare environment, certain emerging and growing trends should be considered in an employer’s future strategy.

Rethinking total rewards

Historically, health plans with high benefit levels have been a mainstay of a total rewards package. Going forward, should there be more emphasis on other components, or new components, in the total rewards package? Perhaps it is time to reallocate total rewards spending away from traditional “entitlement” types of benefits. Some goals could be:

  • Higher percentage of total rewards budget used for performance-based rewards
  • Focus on rewards and approaches where costs can be better controlled at the employer level
  • Emphasis on rewards that support the current cultural strategy
  • More focus on what newer employees value most—tastes and priorities are changing

As an example, would employees value a performance-based bonus, with lucrative payouts, over the current level of health plan coverage offered? Would that in turn help provide better alignment of total rewards to business goals?

Health cost waste identification

Employers have been benchmarking medical and prescription drug claims for many years. Many employers continue to search for other data that could be useful for managing health plan costs—specifically relevant to their populations and the providers used. Expect employers to start using powerful analytic solutions to identify potentially unnecessary and inefficient healthcare spending based on existing and emerging definitions of waste from a variety of focused sources. This information can be valuable for provider and network selection, plan design decisions, evidence-based medicine, determining the appropriateness of services relative to a patient’s condition, and other action steps employers, or their plan administrators, can take to improve the quality and cost efficiency of care.

Population health management

Introduction of population health management techniques has generally been piecemeal at the employer level. It has encompassed disease/case management programs, wellness programs, on-site clinics, and education, but can be much more. Future tools will likely include stronger incentives based on achievement of health goals, a shift to even more individualized responsibility, data-driven targeted intervention at individual and subgroup levels, and value-based plan designs tailored toward improving a participant’s health while enhancing cost efficiency.

Successful population health management efforts will likely become more sophisticated and data-driven. It will be important to understand risks at the individual and cohort level, to measure the impact through well designed longitudinal analysis, and to introduce more targeted education efforts with personal follow-up and consideration of more tailor-made benefit “nuances” for specific situations.

Narrower networks

Moving employees to a narrower network can be challenging from an employee relations perspective and being the first employer in a labor market to do so has often been thought of as risky. The relatively quick development of government and privately sponsored exchanges has provided a path that includes narrower networks to reduce costs, which sets the stage for more acceptance of this approach. Even employers that are averse to private exchanges may now consider contracting directly with a narrower network to help control cost trend.

Over time, as more sophisticated regional and national “narrower networks” develop, more employers may be prompted to make the change. There will likely also be more interest in direct contracting for smaller geographic needs. When considering a move to a narrower network, it will be very important to have proper support with respect to the often complicated provisions of a direct contract, shared savings arrangements, and the cost-efficiency and quality of the network providers.

Bigger data

Proactive self-funded employers study their health claims, identify “red flags,” determine if a situation is actionable, drill down to isolate less efficient cost/quality drivers, and take action to mitigate risk. In the future, data and the related analyses will broaden as a changing marketplace challenges and alters patient and provider behaviors on a more frequent basis.

Employers will need to align with more sophisticated data warehouses with user-friendly drill-down features and higher accuracy in “red-flag” identification. Other data, such as potential waste identification and absence information, will be analyzed on a commingled basis with medical and prescription drug claims to better understand the broader cost of illness and provider practices.

With the growth in narrower networks, direct contracting with providers, and the recent establishment of accountable care organizations (ACOs), it will likely be important to more closely monitor patient care to assure cost-cutting measures do not negatively impact the quality of care.

Telemedicine

The coverage of telephonic and other electronic tools for diagnosis and treatment of relatively simple conditions continues to grow across the country. In the future, this will likely become mainstream. The key to telemedicine will be defining the most appropriate conditions or situations where it will be covered, which will be an evolving endeavor. If an employer has not considered telemedicine to date, it would be good to look into this as a possible cost containment and participant convenience provision. It will also be important to begin discussions with third-party administrators and carriers regarding their telemedicine capabilities, protocols, and experience.

Private exchanges: Matching components to needs

Much has been written about private exchanges, with some sources projecting significant growth in active employee exchanges in the future. While those projections are interesting, it really comes down to what features or components of a private exchange would add the most value to an organization. The expansion of private exchanges may require further evolution to more component-based rather than package offerings.

Defining the features and capabilities that would add the most value to an organization may require looking at things differently. For example, some employers may not value a private exchange as a whole, but would find value in purchasing just outsourced administration, enrollment, communications, and participant education. Others may want to use an exchange, but would like greater control over the number and types of options and offer them on a self-funded basis. Regional and national options built on narrower networks may also be valued, but perhaps just with respect to network rental versus a private exchange package.

The key is to define the specific components that would most benefit organizational goals and needs and then to press the private exchange marketplace for the flexibility of component offerings.

Physician-focused consumerism

In the future, more emphasis may be placed on physician-focused consumerism℠ (PFC) rather than the current focus on employee (participant) consumerism. This is because physicians are often the main decision-makers regarding the use of healthcare services, especially high-cost and/or high-volume services. PFC will likely develop as a set of initiatives designed to align physician decision-making with high-quality healthcare outcomes provided in a cost-efficient manner. It can include the redesign of financial incentives for providers, physicians having greater access to broader patient-level data, updated treatment decision support tools, ongoing education about treatment alternatives, and an understanding of the financial impact of alternatives on patients. PFC can be the basis for collaborative efforts among employer health plan sponsors, provider systems, and physicians. Provider network analysis, especially for narrower networks, may expand to include specific audits of the PFC attributes of the providers in the networks.

Government’s role in healthcare

In general, employers have historically been averse to a nationwide government-sponsored health plan. Has that position changed over the years? Prior to the ACA, some employers were already wondering if it was even possible to better control unrelenting healthcare trends and if health coverage should just be passed off to the government. While those were mostly just fleeting thoughts of frustrated practitioners or business owners, given the volume, nature, and speed of change in the marketplace over the last few years, perhaps those thoughts may turn into more interest by employers. Will some develop strategies to move out of the healthcare business, beyond a private exchange, and support a government-sponsored base of coverage, with employers offering supplemental plans as part of their attraction and retention efforts?

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