🔒O’Connell: Care coordination will be seen as cost-control opportunity

Care coordination will (slowly) be seen as a cost control opportunity

The purpose of this article is “issues to watch”, not “issues that will become mainstream in 2016.”

While the majority of employers will remain engaged with their historical wellness and (typically carrier-based) disease management programs, others will follow the path of some larger plan sponsors by examining new models of care coordination that have proven highly effective. 

Since statistics show that about 3 percent of a covered population drive nearly 33 percent of costs, these new care coordination models are highly adept at segmenting the enrolled population and getting improved outcomes from those most at risk. 

Importantly, we will likely see providers groups play a role in this space and teaming with traditional carrier partners and other market entrants to address this employer need.  

Employers look to “Cadillac” tax on high-cost health plans

Although the healthcare excise tax (aka “Cadillac tax) is not effective in 2016, employers are paying attention to the tax and will continue to implement strategies to avoid it. Congress provided some relief recently, by delaying implementation of the tax two years until 2020.

As a refresher, the measure will impose a 40 percent tax on the gross cost for any employer-sponsored plan above two cost thresholds — $10,200 for single coverage, and $27,500 for family coverage.  (There are higher limits for early retiree programs and also for “high risk” professions.)   These dollar limits apply uniformly across the country – which means that employers in high-cost healthcare areas, like Connecticut, will feel a greater impact.

The gross cost noted above includes the portion of premium the employer pays, plus the portion paid by the employee. The gross cost excludes payments made by employees for deductible and other cost-sharing elements.

There are three key messages to consider.

The excise tax is non-deductible.  For taxable entities sponsoring health insurance, this means that the effective tax impact is likely much higher than 40 percent, feeding the sense of urgency on the part of many employers.

Due to the fact that the Affordable Care Act imposed a minimum essential benefit level, employers who are considering avoiding the tax by paring back benefits will eventually run out of room with this strategy.

The only long-term method to avoid the Cadillac tax is for an employer to significantly slow down the pace of medical cost “trend” affecting their health care cost structure.

How this can be done – and jumbo employers have shown the way – leads us to our next “issue to watch” in 2016.

Market will continue to shine a light on price and quality variances in health care

Another impact of the Cadillac tax will be a drive on the part of employers to consider ‘price and quality’ in their purchase of health care for their employees – much as those employers do with all other vendors in their supply chains. 

The significant difference in price – especially for many elective health care services – is ready made to be addressed by more consumer-centric care coordination models and consumer engagement tools.  The significant difference in quality – always a great surprise to anyone outside the health care field – will reward those who provide the best outcomes, while improving the lives of many patients.

Related to this last point, the management of the sickest patients – the 1 percent of a covered population – is not a trend that will get much attention in 2016, but should.  Sadly, a dispiriting number of these claimants are not correctly diagnosed. 

Once again, lessons from jumbo employers can be learned in how to best serve the clinical needs of this very sick group of people, while at the same time providing superior care.  There are many exciting developments and entrants into this market space, with the opportunity to provide better care, and cost control, to the employer plan sponsor. 

Call it another plank in the platform (with care coordination and price and quality transparency) for an employer to successfully tug in the reins of health care medical trend.

[See what others are saying on HBJ's Economic Forecast 2016 page]