In 2021, employer health plan costs are expected to rise 5%, raising the red expense bar yet again in the ongoing saga of increasing health care costs. As employers contemplate managing expenses and cash flow, those with self-funded health plans have an opportunity to consider creative problem solving by reaching out to their community’s health care providers.
The problem of rising health care costs
Year-after-year rising health care costs impact employer health plans. Large employers expect their health care benefit costs will surpass $15,000 per employee in 2021, affecting employers and employees. On average, employers will cover nearly 70% of costs while employees will assume about 30%, around $4,500 for an individual and more than $6,000 for family coverage. In recent years even as American salaries have risen, net pay for many has remained flat because of increasing health insurance costs.
What’s the cause? Many factors are attributed to ever-increasing costs in the complicated American health care system. Due to a lack of set prices for medical services, providers are free to charge what the market will bear. The amount paid for the same medical service can vary significantly depending on the geographic area and payer (private insurance, Medicare or Medicaid).
A 2019 HealthAffairs study reports that hospital prices are the main driver of health care spending inflation. For inpatient care, hospital prices grew 42% from 2007 to 2014, while physician prices rose 18%. Similarly, for hospital-based outpatient care, hospital prices increased 25% while physician prices grew 6%. Yet, hospital margins remain thin, and the model of fee-for-service is changing as the Affordable Care Act encourages more value-based models of care that focus on driving quantifiable positive outcomes for patients, such as limited readmissions and higher patient satisfaction.
Balancing hospital revenues and employer costs is not an easy issue to solve and can even be adversarial. But not all hope is lost. Hospitals are profit centers after all with a customer base to whom they want to provide value, and they are also significant employers in their communities — facing similar hikes in employee benefit costs to their bottom line.
And perhaps that common ground is the opening for employers with self-funded benefit plans?
Finding the win-win
Self-funded employers may have more leverage and negotiating power to reduce their health care spending in their communities than they realize. According to the Kaiser Family Foundation, more than 60% of Americans with employer health benefits are covered by self-funded plans. In an individual community that can translate into a large segment of the population that no health care provider will want to ignore.
Even if an employer has large market share, employers coming to the negotiation table will want to emphasize the benefits a mutually beneficial relationship will offer the provider. Implementing these tactics may improve employer-provider relationships, improve outcomes for employees, and ultimately reduce employer and employee health care costs:
- Community self-insuring. Creating a health insurance model where corporations and health care providers collaborate to drive population health— both putting skin in the game and allowing all parties to share the rewards of success.
- Preferred network building. Forming exclusive preferred provider networks with benefit plans, where employees are incentivized to receive quality care for a lower out-of-pocket expense.
- Employee education. Helping employees proactively understand how choosing a provider from their employer’s preferred network will reduce their immediate out-of-pocket expenses and their long-term premium costs. Educating employees on health care and health insurance terminology is also an important step in driving participation with the highest-value (lowest-cost) providers.
- Referenced-based pricing. Using data-driven RBP, market knowledge and fair pricing to negotiate preferred provider reimbursements proactively for high-cost care services.
- Concierge medical services. Coupling catastrophic coverage with a network of providers that offer unlimited primary and urgent care services for a monthly fee may save employees time and money and offer employers potential immediate savings as claims are funded as they are paid rather than relying on prepayment.
Engaging broker relationships to optimize outcomes
An employer’s insurance broker can play a significant role in fostering employer-provider relationships and delivering mutually beneficial solutions in several capacities:
- Taking on the role of negotiator.
- Providing analytics and data on employer’s costs, claims and provider reimbursements.
- Working with high-performance partners to design intentional benefit plans with improved care outcomes and lower spend in mind.
- Increasing employee engagement through personalized technology to improve health outcomes and alignment with value-based care.
- Offering creative risk management solutions to aid in lowering costs and improving relationships with providers.
In the complicated world of health care, employers that build strong ties with their brokers and community health care providers can help everyone achieve common goals: high-quality care, lower costs and positive health outcomes.