This month’s decision to delay the Affordable Care Act’s employer mandate until 2016 coupled with dramatic increases in health insurance premium costs assures employers will play a stronger role going forward.
57% of all companies provide health insurance covering 149 million in the population. But participation varies widely by industry and size of company.
Participation: Manufacturing (72%), Services (65%), Transportation/Utilities/Communications (62%), Agriculture/Mining/Construction (60%), Wholesale (54%), Healthcare (51%), Financial services (49%), Retail (29%) (Kaiser/HRET Survey of Employers)
Size: Smaller companies under 199 are less likely to provide health benefits than larger companies, though premiums they pay to insurers are slightly lower than their larger counterparts.
Declines in employer sponsored coverage declines are due to costs, not the Affordable Care Act. Consider: the percentage of non-elderly workers with employer-sponsored coverage decreased from 68% in 2000 to 61% in 2009 before the law passed.
Employers pay 82% of health costs for singles and 71% of costs for those in their family health plans. Over the past decade, they have shifted more financial responsibility to their employees.
- Premiums for employers from 2003-2013 increased 80% but employee contributions increased 89%.
- At the same time, employers have reduced coverage for retirees and dependents, and in many industries, kept wages low to offset health cost increases.
Most employers use similar contracting and plan design levers to control their costs.
High deductible plans: Employers are shifting their offerings to high deductible options that require employees to absorb at least $5000 out of pocket before coverage kicks in. And they are watching with intrigue the evolution of the private exchange market as a channel to which their employees will be sent.
Narrow networks: By contracting with a subset of hospitals and doctors that are measurably safer, cheaper and better at delivering optimal outcomes, employers can channel volume to fewer providers and trade their volume for value.
Coverage Limitations: Employers are cutting covered services for retirees and dependents.
Targeted Interventions: 10% of the active under 65 workforce consume 64% of costs. Employers are contracting for interventions via assigned health coaches, case management contracts and
Wellness Incentives: For the 90% of employees who are in reasonable health, employers are re-engineering their workplaces with healthier food options, exercise options and consistent messaging about the importance of holistic mind-body healthiness.
Primary Care Clinics: In 2500 worksites, primary care clinics are operated. And employers are keen to see retail clinics increase their numbers from 1600 today.
Direct Contracting for Workers Compensation and Worksite Injury Programs: Occupational medicine, private physical therapy and behavioral health providers are staples in most employer-sponsored plans.
And some employers participate in Business Health Coalitions and serve on hospital boards to engage more directly. For most employers, deciphering how to address health costs defaults to their Human Resource designee or an insurer used for claims administration or full risk coverage.
Some augment their input via independent benefits consultants or best practice counsel from the trade organization with which they most closely affiliate. And a few are doing more.
Looking ahead: employer activism in health reform 2.0
The activist agenda for employers likely to take center stage in 2014-2015 will include five additional elements:
Increased Lobbying for Public Health Improvements: Some employers are hiring lobbyists or engaging legislators to address social issues that impact costs and access to health care services.
-Helmet laws (13 states have laws, taxpayers pay 63% of the $1.3 million price tag for each accident).
-Improved coordination care between public health programs and the local providers
-Improvements in school health clinic programs so reduce employee absenteeism when students are sent home
Increased Provider Penalties in Value based purchasing Programs: For 2014: the over/under for hospital payments will be +/-1.25%; 1231 will see an increase; 1451 will be penalized. Employers want tougher penalties, and expansion of the program to physicians and outpatient facilities.
They see patient centered medical homes, bundled payments, accountable care organizations as steps in the right direction, provided penalties for poor performers are stiffened, and the upside for the best performers increased volume trading for lower unit costs.
Increased use of Direct Contracting, Reference Pricing and Price Transparency: Employers are keen to exploit the wide variance in unit costs (Ex: prices for a three day hospital stay, surgeons fees for certain procedures, et al) as a basis for direct contracting with certain provider organizations willing to accept bundled payments and performance risk.
Lowes, Wal-Mart and others have announced their plans to channel high cost spine and heart surgeries to a handful of providers.
Increased Activism around Unnecessary Utilization and Fraud: A handful of employers are combing through clinical data to assess how much of their utilization (tests, procedures and drugs) is unsupported by medical necessity (evidence). And employers believe there’s close correlation between fraudulent activity by providers and incentives that reward volume.
Increased Pressure on Insurance Plans to Provide Value: PPO premiums range from $437 in Kansas to $819 in Wyoming. The range is widest comparing the 5 most expensive states: (WY, AL, DE, MS, GA) to the least (KS, UT, OK, TN, NE). Employers, especially those not self-insured, want greater value from their health insurance premiums, and they’re miffed by the impressive profits posted in the sector–+47% last year per Morningstar.
Employers want improved provider efficiency and effectiveness, access to their clinical and administrative data, and insight from their plans around new ways to reduce costs while enhancing quality and safety.
Employers are worried about health costs. They are frustrated. Most do not readily understand the correlations between costs and quality, or the concepts of inappropriate variation in diagnosing and treatment. But they’re ready to take control of these issues, believing their health costs are likely return to 6% annual increases.
Employers that provide health insurance coverage provide the operating margins that fund the technologies, facilities and staffing we use. They suspect the Affordable Care Act will increase costs and they are discontent that insurers and providers are non-responsive to their needs.
That’s about to change, and the impact of accelerated employer activism will ripple through the U.S. health system. Game on.
Paul Keckley, PhD is an independent health care industry analyst, policy expert and entrepreneur. Keckley most recently served as Executive Director of the Deloitte Center for Health Solutions and currently serves on the boards of the Ohio State University Medical Center, Healthcare Financial Management Leadership Council, and Lipscomb University College of Pharmacy. He is member of the Health Executive Network and advisor to the Bipartisan Policy Center in Washington DC. Keckley writes a weekly health reform newsletter, The Keckley Report, where this post originally appeared.