Employers Take Steps to Rein in Rising Health Insurance Costs
No longer content to let government, hospitals, doctors, and insurance companies shape the nation’s health care system, employers are showing a growing willingness to rein in rising medical costs on their own, concludes a new report by the PwC Health Rese
Employers and employees alike are feeling the strains of rising health care costs. Each June, HRI projects the growth of medical costs in the employer insurance market for the coming calendar year and identifies the leading factors expected to affect the trend. This year’s report, “Medical Costs Trend: Behind the Numbers 2020,” forecasts for next year a medical cost trend of 6 percent, a rise the report characterizes as stabilizing but still exceeding inflation in the overall economy. HRI found prices, especially for prescription drugs, continue to be the primary driver of health care spending, growing at a faster rate than utilization.
Taking the Lead
As prices continue to rise, more employers are taking matters into their own hands, becoming what HRI terms “employer activists.” These employers engage in “negotiating contract prices themselves, setting up provider networks and even building a parallel health system” to take care of their employees, the report states.
Employers have tried more traditional ways to control costs, such as increasing deductibles and coinsurance, but excessive use of insurance has not been a factor in driving prices higher, according to HRI. In a report released earlier this year, HRI found use of medical services in employer-based insurance decreased by 0.2 percent from 2013 to 2017, yet health care prices rose 17 percent. HRI found at least a third of individuals and families with an employer-provided high-deductible plan said they don’t have enough money saved to pay their deductibles.
The HRI report states,“2020 likely will, in some ways, be a turning point in the long arc of employer-sponsored insurance, a year in which more employers fight back using new tools and strategies to control the ever-growing costs to their own organizations, their employees, and their families. Dissatisfaction with the system is widespread among all stakeholders, and there is a sense among employers that it is time to think creatively and broadly about changing the system.”
Employers are expressing increasing frustration with the current cost climate, Michael Thompson, president and CEO of the Washington-based National Alliance of Healthcare Purchaser Coalitions, told HRI.
“Employers are pursuing market-based solutions to the price issue,” Thompson said. That may be the last step before businesses turn to government for a solution, he warns. “If market-based solutions don’t work, employers may push for health care to be regulated like a public utility.”
The report describes several market-based solutions employers are using. One is to create more onsite medical clinics. HRI reports 38 percent of companies with 5,000 or more employees offered a worksite clinic in 2019, up from 27 percent in 2014. These clinics also expanded the services they offer to include primary care and other services.
Another program involves encouraging employees to use lower-cost care options, such as freestanding facilities and in-home care, when appropriate, as an alternative to more expensive providers. Employers are also trying to increase the use of telemedicine as a way to lower out-of-pocket costs while providing quality care.
Some employers are finding an a la carte approach works best, especially when they help employees navigate expanded benefit packages. As menus of health care options expand, employers can introduce employees to special services, such as a company weight loss program, and explain why they are offered and how to best utilize them, with the goal of keeping overall costs down.
Larger companies are joining forces with one another to expand their health care offerings and obtain more leverage in dealing with insurers and providers. One coalition attracting much national attention is Haven, a group effort by JPMorgan Chase, Amazon, and Berkshire Hathaway. Another is Health Transformation Alliance, comprising 50 major corporations such as American Express and Marriott.
The HRI report is based on 55 in-depth interviews HRI conducted with health industry executives, health benefits experts, and health plan actuaries whose companies cover more than 95 million employer-sponsored large-group members. HRI also analyzed results from its national consumer surveys of 2,500 U.S. adults and from PwC’s 2019 Health and Well-Being Touchstone Survey of more than 550 employers from 37 industries.
Bonner R. Cohen, Ph.D., (firstname.lastname@example.org) is a senior fellow at the National Center for Public Policy Research and a senior policy analyst with the Committee for a Constructive Tomorrow (CFACT).
Internet Info:Medical Cost Trend: Behind the numbers 2020, Health Research Institute, June 2019: https://www.heartland.org/publications-resources/publications/medical-cost-trend--behind-the-numbers-2020