Healthcare coverage — that’s a big issue for employers these days. And, with the open enrollment period upon us, now is the time many employers are trying to look into the near future to make the best choices for their company and their employees. The challenge is the change that the healthcare landscape is still undergoing.
“The biggest impact we think employers will see is tax reform,” says Doug Adelberg, senior VP of benefits with accounting firm Lovitt & Touché, noting this is an issue that relates back to employee benefits. Healthcare is one of the largest deductions in our tax system, he points out, and notes, “Both presidential candidates say they’ll go after the benefits tax deduction.”
The Healthcare Landscape
Educating the User and the Buyer
A first step for employers is to educate their employees about shopping for benefits, and how and when to use them. “This is biggest thing that will help employers with that downstream impact,” Adelberg says. With co-pays, for instance, many employees believe that when they go to the doctor and pay their $20, that’s what the visit costs. “They don’t realize somebody else is paying the difference.”
David Berg, co-founder and chairman of the board of Redirect Health, points out that people use their co-pay when that may not be their best option. “Consider,” he says, “a generic medicine may cost $4, but with co-pay through insurance, it may cost $20.”
Recognizing that, as deductibles increase, employees are exposed to more out-of-pocket cost, Mike Tilton, VP of sales with Blue Cross Blue Shield of Arizona, says his company has increased its investment in transparency tools to help policy holders understand the ramifications and costs of accessing the healthcare system. “Healthcare is not as simple as buying a TV,” he says. The goal is to give people more accurate insights regarding the actual cost of healthcare. For instance, he says, “it will show your specific benefits and where you stand with your deductible. And it will calculate your cost for a chosen option, such as a surgical center or a medical office.”
How to control cost is one of the major issues for employers. Adelberg breaks that down to two options: steerage and intervention. Steerage is the plan design — deductions, co-pays, narrow networks. Intervention is the utilization of wellness programs, disease management programs and case management programs. “Aggressive employers are getting programs that are attacking chronic diseases,” says Adelberg, pointing to diabetes as example and explaining the cost to manage it is low but “it gets expensive if it’s not managed” — trips to the emergency room being just one possible consequence.
In healthcare, one size does not fit all. “It’s important to make consumers aware of options,” says Jim Prendergast, co-founder and CEO of telehealth giant HealthiestYou. However, Adelberg observes, “Too many employers are making choices that the employee might not choose; one or two medical plans cannot possibly solve the needs of 300 employees.” A broad range of offerings could include PPOs, HMOs, HSAs and narrow networks.
Explaining, “We’re seeing employers focus on creating more choice,” Tilton says BCBSAZ has focused on specialty products — dental, vision, disability, critical illness. After all, he points out, “An employee might have coverage through the spouse, and so might need only vision.” Benefit Starter, which Tilton describes as an online marketplace that lets employees shop like they would for products on amazon.com, is a tool “for employees to choose the plan that’s best for their family” as well as medical products.
Matching the plan to the need touches again on the need to educate the employees. “Most employees are buying more insurance than they need because they’re focused on having a low-deductible plan,” Adelberg observes, explaining a better option might be taking a plan with a higher deductible and matching it with a supplemental product — an accident plan, critical illness plan, hospital indemnity or telemedicine — to lower the overall cost of benefits. Lovitt & Touché designed its private healthcare exchange to address that need. Says Adelberg, “Employees are directed through an online enrollment system that asks about utilization, risk tolerance and financial status — to guide them to a set of benefits that will fit what they need and can afford.”
Choosing a Plan
Adelberg reports great results from employee education, reducing and stabilizing costs for the employers. “A company that has completed two renewal cycles has had a zero percent increase; some companies even see rate decreases.”
While similar to the old cafeteria-style plan, Lovitt & Touché’s exchange uses technology to personalize and customize benefits.
Tilton notes plans at BCBSAZ are designed to offer employees multiple options so they can choose the best option for their family. One is a higher deductible HSA. Another is the Alliance Network — created in partnership with Banner Health; this narrow network has a slightly smaller footprint in terms of the number of facilities and providers, but, Tilton says, allows access to all Banner Health and Honor Health facilities in Maricopa County. There is also a PPO option for those who want a more traditional plan.
It should be noted that most healthcare plan offerings are for groups; individual plans are a disappearing product. Over the past three years, the pricing on small group plans and individual plans converged because, explains Alan Leafman, president and CEO of Health Insurance Express, “the mandated benefits, for the most part, were identical, and individual and small-group carriers were prohibited from doing risk adjustments in their underwriting practices.” He believes micro and small businesses will feel this change most as they try to remain competitive in recruiting messages and retention strategies.
Leafman has seen a trend in recent years for micro businesses to drop group medical plans and send their employees to the marketplace, usually with a stipend. “But with a shrinking line-up of carriers and provider networks, the trend will reverse and start migrating back to group plans.”
Self-funded insurance has advanced as an option. In fact, Leafman says that for small and mid-sized businesses, “There are more options for partial self-insured plans than I’ve ever seen before.” Once available only to organizations of 500 or more employees, the threshold dropped to 100 — and is now possible for as few as two participants.
“For certain groups, it makes a lot of sense to consider self-funded as a solution because the going-in rates are 15–20 percent below fully insured rates,” Leafman says. For instance, groups with more males than females and with a younger average age will likely have lower utilization and so have a higher expectation of receiving premium refunds at end of plan year. It also makes sense for employers serious and proactive about employee wellness and disease management “because employers on a fully insured plan don’t reap the benefits except indirectly through reduced absenteeism and increased productivity.” He gives the example of a diabetic on a disease management program, reducing his claims from $3,000 to $300. “As the employer claims payer when you’re self- or partially self-insured, it’s money back in your pocket. If it’s a fully insured plan, [the benefit of] reducing claims cost goes to insurance company” — with perhaps a lower rate increase on renewal.
“Don’t self-insure everything,” cautions Berg, suggesting that it doesn’t make sense to self-insure unlimited hospital costs. “Insure the things that are more catastrophic in cost” — which, he points out, is what people commonly do for other insurance such as car and house. Do, however, “partially self-insure the routine, everyday care — primary care, preventive services, chiropractic — because it’s so inexpensive.”
Elements of the Whole
While doctors have been doing medicine over the phone for a long time, technology has enabled significant advances in telehealth. Prendergast cites high-resolution video and connectivity that allows sharing of notes and health records as well as protocols to help ensure doctors aren’t missing anything — which can include legal protocols that are sensitive to the rules and regulations that may differ from one state to another.
“Time to care is significant,” Prendergast notes. Clients don’t need to wait two to three days for an appointment; in fact, they can pick up the phone at early symptoms, accessing care earlier and more affordably, and be more proactive about their healthcare. There’s also a convenience factor in not having to go out, which also saves the expense of a visit to a doctor’s office or other healthcare facility as well as possible paycheck impact due to time lost from work. Additionally, Prendergast points out, people aren’t exposing themselves to germs in waiting rooms. “It’s that exposure that often leads to secondary illness, especially when [the person is] already weak,” he says.
“By removing barriers, we can increase the opportunity for people who normally don’t seek care now,” Prendergast says. He relates the experience of a client who finally called HealthiestYou only at the repeated urging of his wife — in fact, it had been his intention to wait until the next morning, but she made the call that night. “He was having a heart attack, and we were literally able to save his life.”
For the individual, there’s the obvious cost savings of the deductible — or the entire cost of care if it’s a high-deductible plan. Telehealth also often results in a savings in the secondary cost of follow-up after a visit to an emergency room or urgent care. Says Prendergast, “Only about 6 percent need a follow up.”
There are benefits enjoyed by the employer as well. Absenteeism goes down, presenteeism goes up. Plus, of course, there is no claim paid out.
When telehealth is explained properly, buy-in is simple, Prendergast says. “Awareness is the hard part.”
In this regard, Leafman lauds HealthiestYou for reaching out to employers to make them aware of what telemedicine is and how it can help them. Referring to it as “probably most effective telemedicine program in the country,” he says what it especially excels in is employee engagement. Among employers that offer a telemedicine component with their other benefits, he says, “Most employers’ rates are less than 5 percent; HealthiestYou’s rates are 60–70 percent.”
“Our product is all about utilization; we make sure we’re there for them,” Prendergast says. Explaining the Scottsdale-based company’s recent acquisition by national Teladoc, he says, “HealthiestYou is the best at engaging, and has the best tool set, but we never felt confident with how to scale. Teladoc is best in that.” Recognizing that companies may not get the message out to their employees, the company continues to focus on creating awareness — not just as a resource when someone is sick, but being proactive, talking to employees, and having have webinars and enticing them to sign up.
“We assume that a lot of disease burden comes from genetics and other things,” Tilton says, but notes, “Fifty-four percent of healthcare cost is driven by the choices people make every day — what we eat, how we manage stress, whether we smoke, how much we exercise.” To address that, wellness programs have become popular.
“I believe all employers should a have wellness program,” says Lovitt & Touché’s Adelberg, who is also the president of the Wellness Council of Arizona — which works with employers to help them implement wellness programs. Wellness programs improve employee morale, help keep employees generally healthier, and promote presenteeism, which, in turn, contributes to safety and productivity. “For instance,” Adelberg explains, “if a person drives a backhoe, and his mind is not on issues outside of the job, it’s safer for him at work and for employees around him.”
However, Adelberg notes, there is no direct correlation between a wellness program and lower claims. Cost is mostly driven by large, chronic claims; 80 percent of claims come from 20 percent of users. So the greater need, he says, is a disease management program.
More attention is being given today to total population health, according to Tilton. Part of this is how to keep healthy populations healthy. BCBSAZ addresses this with its Blue Works for You, providing case managers, wellness coaches, online resources to track health, health assessments and other tools to help employees live a healthy lifestyle and make better choices.
The other part is how to help people manage chronic disease — to reverse it, if possible, or mitigate the progression of the disease with employees who are chronically ill. Moving Health Forward is BCBSAZ’s effort to help people in this category, and it focuses on six chronic conditions — diabetes, COPD, asthma, hypertension, coronary artery disease and heart failure. “We picked these because they are the most prevalent, drive the most healthcare cost, and have the most significant impact on productivity in the workplace,” Tilton says. Based on disparate data from labs, pharmacies and the healthcare system, “We can predict where employees have more cost, engage with them through outreach programs and nurses, and partner with their physicians to reduce the disease burden and help those folks get healthier.”
Leafman notes that diabetes has a long history of effective results in a well-run disease management program. Pregnancy also falls under the purview of such programs, he says, because of the importance of maintaining a healthy pregnancy and delivery.
Referring to his company’s figures from 2015, Tilton says, “If we engage the employee, we can reduce complications — and save their employer $670 per member, per year.”
This is the approach Frances Ducar describes her company, Healthcare Solutions Centers, following with the onsite clinics it provides businesses. Noting the importance of wellness plans, she says, “We go further into wellness, and do preventive care and biometrics.” Keeping employees healthy makes a difference given the rising insurance rates for fully insured plans, and, for employers footing the bill under self-insurance plans, there’s a vested interest in trying to prevent catastrophic events from happening. She cites return on investment at 3:1 for companies putting healthcare dollars into disease management programs. Also, she says, “A lot of insurance companies are giving wellness dollars for onsite wellness, and have wellness funds with partially self-funded plans.” HCS’s clinics — whether the employee accesses care when the clinic is onsite at the employer’s place of business or by phone when it’s not — are contracted by the employer and free to the employee. “It avoids out-of-pocket cost to the company,” she says, noting this is a benefit even if the company self-funds its healthcare plan.
A related benefit is an employee assistance program, which Leafman says all larger employers offer their employees. With such a program, the employee can call a toll-free number to a contracted vendor who can help with such issues as financial stress and family stress. (“We distribute a lot of wellness publications, and our publications on stress and stress management are our most popular,” Leafman shares.) Since the employer is already paying for the plan, there is no charge to the employee for using it.
This goes back to Adelberg’s point of employee education being important — teaching the employee to use benefits appropriately and not necessarily going through the healthcare plan with the resulting need to submit a claim. “If the employer can teach employees to better utilize their overall benefits, the overall costs go down because everyone is using the plan appropriately — and then costs are reduced in the future,” he says.
Waste and Administration
Berg attacks rising healthcare cost from another angle. “Costs will go up not because of the cost of healthcare itself,” he says, “but because waste and administration have gone up.”
Emergency healthcare; appropriate assessment, diagnosis and treatment; risk mitigation; and risk transfer — these are the elements of healthcare Berg points to as having value. Waste, he says, comes from “things that are unnecessary, duplicated or overpriced.” Take a sprained ankle, he explains. A patient may start with an X-ray that costs $30. Later, the ankle feels worse, so the patient ends up going to the emergency room, where the doctors do not have access to the earlier X-ray so they take it again — “but the hospital’s infrastructure costs are so high that this X-ray costs $1200.”
Says Berg, “Employers can create their own system through employer-sponsored self-insurance so they get the valuable parts they want.” Once they get the cost down, they can then find insurance that supplements the plan the employer has built. Plus, he notes, “If you get rid of the waste and administration, you don’t need as much insurance.”
There is an administrative function involved in co-pays and deductibles. Says Berg, “It takes a lot of accounting, explanation of benefits, statements, et cetera.” This engenders a tremendous amount of paperwork. In the healthcare plan Berg offers his employees, which has no co-pays or deductibles, “We’ve just eliminated it.”
In fact, he offers full healthcare for free to his employees and their families, and spends less on healthcare today than he did 10 years ago. “We spend more on the healthcare, but less on waste and administration, so total cost is down.” And, although there is a cost to the company, he says, “We estimate the return on investment at 4:1, because they’re a more engaged, productive team. That more than pays for the healthcare we provide.” And, he adds, “It’s an incredible competitive edge for our companies.”
“Employers need to eliminate as much waste as possible, and buy the least administration possible,” Berg says. This requires the healthcare plan be employer-sponsored or self-funded. “It’s like what Steve Jobs did with iTunes: ‘If you like one song, I’m going to let you buy just that one song without the other songs attached to it,’” he explains. “You can actually increase the cost of the healthcare you provide to people if your overall costs go down and your need for insurance goes down.”
Tilton brings up another factor impacting cost. “Through research, we’ve found overall health status and relative cost of care has to do with the patient’s relationship with the primary care physician,” he says, explaining BCBSAZ’s development of its Patient Centered Medical Home. Noting patients have a relationship with specialists they may be seeing, and that it can be hard for primary care physicians to track everything, he says, “We work with physician offices to better coordinate the patient’s care.” He notes BCBSAZ is also changing its expectations of providers, rewarding them for a higher standard of care in such ways as making sure patients are getting annual physicals and are compliant with their medications.
“There’s a lot for employer groups to be excited about,” Leafman says. In his experience, there are more options than ever before for employers that really want to be hands-on with employee benefits, and they can find effective ways to save while still engaging their employees. While emphasizing, “It’s important to make sure employees perceive that their benefits really are truly a benefit to them and not something that’s grudgingly provided to them by their employer just because every other employer does it,” he sees a healthy selection of tools and ancillary vendors for companies to be able to create that impression for their employees and produce positive results.