When healthcare stakeholders and officials talk about reducing health costs, they usually look to three areas: providers, health insurers, and patients. Another healthcare stakeholder—the employer—has a huge influence, but it’s often an afterthought in the public debate.
As part of a three-part series profiling the health plan of 2020 that I wrote for HealthLeaders magazine, I tackled how insurers and employers need to become more innovative in terms of benefit design.
Some employers are already leaders in this area, most notably Caterpillar and Marriott. These leaders are already investing in benefit design that is based on value and quality and looks to reduce overutilization of services and medications that are not top value.
While other employers keep dumping more premiums and copays onto the backs of their employees, other leaders are finding new ways to avoid a future of $10,000 deductibles.
The average health plan deductible is now about $5,000—and that’s not just consumer-directed health plans. That includes PPOs and HMOs.
In my magazine article, I profiled Jack Friedman and Providence Health Plans in Beaverton, OR. Friedman, who is the company’s CEO, has been a leader in bringing value to benefit design.
His health plan, which serves more than 380,000 people in Oregon and southwest Washington, is working with employers to create a three-tiered system that takes into account value, prevention, chronic illness care, and overutilization of services:
- Tier 1: No copay or low copay for ambulatory care for those with chronic conditions, as well as preventive services to help people from becoming chronically ill.
- Tier 2: This would resemble the current healthcare system and would ask consumers to chip in 20% coinsurance for normal healthcare.
- Tier 3: This tier would require consumers to pay more out of pocket for services that do not provide a high clinical value.
As you might expect, healthcare stakeholders—including patients, doctors, employers, and health plans—like the first two tiers. Prevention and chronic care would be covered at 100% so there are no cost barriers to that care and consumers in Tier 2 would have a stake in their day-to-day healthcare.
Stakeholders fret about the third tier because:
- Doctors worry how insurers may define “high clinical value.”
- Patients don’t like the idea of insurance not covering some services that the individual believes are valuable.
- Employers don’t want an angry workforce demanding to know why their insurer refuses to pay for services that the individual may find valuable, but the insurer (and research) finds is not worth the money.
Oregon already has experience in this model. The state’s Medicaid program has had a similar tiering design in place for 20 years, which Friedman says has controlled costs. The state found the three-tiered program costs about 10% less than the traditional PPO benefit design.
The leaders in benefit design have already stepped forward to test out innovation programs. Innovation usually comes from the private sector and then public programs try it later. (One only needs to see that value-based insurance design — also known as VBID — is part of health reform, though leading employers have incorporated VBID into benefit design for almost five years.)
Though the private sector often leads, there are still plenty of employers not willing to test out new programs. Instead, they often look for more arcane ways to save on healthcare, such as shifting more costs onto the individual.
But that way of thinking is not sustainable.
Health insurers should help educate employers that trying benefit designs that reward value is the way to go. Yes, making these changes require employee education and will likely cause some employee pushback, but in the long run adding value is a possible way to avoid the $10,000 deductible.