🔒Employers slow healthcare costs with innovative plan designs

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The total health benefit cost per employee increased an average of just 2.2 percent this year in Connecticut as more employees moved into high-deductible consumer-directed health plans (CDHPs), according to an annual survey by a global health and benefits consultant encouraging employers to drive transformative change in health care.

Mercer, which has an office in Hartford, said this year's mild increase mirrored a nationwide trend, in which U.S. employers experienced the smallest rate hikes since 2013 and, before that, since 1997. It added that Connecticut employers are predicting a 3.8 percent increase in premiums next year, as they try to hold down costs by adding a CDHP, switching carriers or changing plan design. The moderate rate hikes run counter to double-digit increases in premiums next year on public exchanges, including Access Health CT.

The disparity speaks to the exchanges' more challenging risk pool with greater healthcare needs versus the pool for employers, who've been educating employees for years on being better healthcare consumers and whose risk pool is well understood, said Dawn O'Shaughnessy, health and benefits leader for Mercer's Hartford office.

While employers have launched a number of initiatives to help control costs, from HDHPs with lower monthly premiums than PPOs to accompanying Health Savings Accounts (HSAs), lower-cost telemedicine and other incentives, Mercer sees greater opportunity for employers to move the cost pendulum long term, O'Shaughnessy said.

“Mercer has a much larger point of view on all of this in that we really feel there's got to be a transformation,” she said. “What we continue to see is cost-shifting. Even high-deductible health plans with Health Savings Accounts, it's a cost-shift. You're putting more onus on the employee. You're giving them a great tax-advantage account (HSA), to build for future healthcare expenses, but at the end of the day, employers know cost-shifting is a short-term solution. There's going to be a point where we can't continue to cost-shift.”

Employers have the greatest potential to transform the system because they provide coverage to a large percentage of the population, O'Shaughnessy said. Mercer believes employers can affect change four ways: pay for care with the best value; point employees to the highest-quality provider for the right condition; personalize employees' healthcare experience; and embrace disruption by continuing to do new things.

On the first item, providers should be reimbursed based on value and quality of their services, not volume, and employers can design their programs to impact that hugely, she said of value-based pricing.

Second, to help guarantee quality outcomes, some large, self-funded employers are contracting directly with health systems to funnel all their employees there for guaranteed value and quality outcomes. Similarly, some employers are requiring employees needing certain high-cost treatments for procedures like transplants or complex cancer cases to use a particular facility — even out of state with all travel covered — if data show that facility offers the best outcome and if employees want the costs fully covered. O'Shaughnessy already sees Hartford area employers sending employees to facilities like the Cleveland Clinic.

Employers can build their programs so that certain higher-cost services are only covered at key quality health systems, O'Shaughnessy said. Or, employers can allow treatment closer to home, for example, but at lower reimbursement versus 100 percent coverage at a facility the employer deems a center of excellence. It's not meant to be a penalty, but a reward for using the facility deemed best quality for that condition, she added.

That's already occurring and she expects to see more of it.

Mercer also encourages employers to continue using tactics to personalize employees' interaction with health and well-being programs to keep them engaged with their health on a daily basis. About a third of large employers (at least 500 employees) encourage employees to track physical activity with wearable devices and more than half provide employees with a health advocacy service.

Some provide a health advocate to help members find the right healthcare provider, compare costs and resolve claims problems, and who will stay in touch throughout a care episode to provide support as needed, Mercer said.

On embracing disruption, O'Shaughnessy said, “We're seeing employers do a lot of things that a couple of years ago they would have never done.”

That goes beyond driving employees to specific facilities for certain conditions or contracting directly with healthcare systems.

More employers are engaging with the hundreds of vendors that have emerged in recent years, from telemedicine to niche services for sleep disorders, infertility, diabetes and more — vendors who claim their narrow focus benefits patients.

“We are seeing this explosion of vendors of technology, of creative outside-the-box thinking and we are seeing employers engage with these vendors, wellness vendors for example, where they are driving walk-in competitions, and they are gamifying health care,” O'Shaughnessy said.

Mercer, though, isn't just working with employers to drive down healthcare costs, she said.

“We are now looking at … driving the whole concept of bringing your best self to work,” she added.

That includes looking at stress, which has a significant impact on health, and addressing the causes of stress, such as financial concerns.

“We are now looking all the way at the root cause of financial distress, rolling out solutions to that as a long-term solution and impact driver to health care,” O'Shaughnessy said. “And so we have to think so far outside the traditional medical box.”

Short-term options

Among short-term, cost-containment solutions, telemedicine is growing in popularity, O'Shaughnessy said. Among large employers, 59 percent offered telemedicine this year, up from 30 percent last year and 18 percent in 2014, Mercer's survey showed.

The typical charge for a telemedicine visit is $40 vs. $125 for an office visit, Mercer reported.

Mercer also is seeing more employers consider spousal surcharges to motivate employees' spouses who may have coverage available through their own employer to use that instead.

Another trend is smoking surcharges, which employers can use to motivate smokers to consider quitting. A smoker can achieve a nonsmoker rate by enrolling in a smoking-cessation program, even if they're not successful in quitting.

Mercer's survey also shows 61 percent of large employers offered a high-deductible plan, or CDHP, this year, a number expected to rise to 72 percent by 2019.

The Phoenix Cos. in Hartford, which is self-insured, is among those offering one.

“Phoenix was able to hold down overall employee-benefit costs for 2017 through a combination of plan design changes and direct incentives for employees to switch from a traditional PPO plan to a high-deductible health plan that allows them to establish a Health Savings Account (HSA),” Suzette Louro, second vice president, corporate benefits for The Phoenix, said via email. “Our employees have been responding positively to the lower upfront costs of the high-deductible plan and the tax advantages they can get from an HSA.”

Nearly a third of all covered employees in the Mercer survey, or 29 percent, enrolled in a CDHP this year, up from 25 percent in 2015 and 3 percent a decade ago.

Part of the move toward CDHPs is to raise awareness about the true cost of what services and medications cost, O'Shaughnessy said. Employers help by pointing employees to price transparency tools to see costs per provider, allowing them to be smarter healthcare consumers.