Organizations continue to grapple with providing health care access while limiting cost hikes.
A 2018 Gallagher survey of employers found that 74 percent consider health benefits cost management a top priority, yet 44 percent don’t have an effective strategy. These respondents also cited the high costs of medical services, prescription drugs and specialty drugs as their top three health care cost-management challenges.
Smart Business spoke with Joe Roberts, area vice president at Gallagher, about health care cost-management tactics.
Why should cost shifting be avoided?
The goal of effective cost management is to repurpose health care spend without disrupting premiums, coinsurance rates and deductibles. Cost shifting should be avoided because employees and their families suffer the financial pressure of higher expenses.
Some tactics that employers take to contain health care spend can actually weaken their ability to manage important health outcomes, like physical and emotional well-being. An example is an employee who responds to cost shifting by avoiding the expense of medical care. At worst, the employee could end up in the hospital for an untreated condition. At best, the employee may have escaped that outcome or the employer would have paid less for the hospital stay — if the plan incentivized regular care. Cost-management tactics may also affect morale, workplace culture and oher intangibles.
Employers should explore less common tactics that are gaining traction.
- Provide employees with cost transparency tools.
- Offer health care decision support.
- Use a specialty pharmacy benefit manager.
- Carve out pharmacy benefits.
- Use reference-based pricing for health care services.
They also should closely review the language in vendor contracts.
How can data-driven insights help identify needed benefits changes?
Employers walk a thin line between providing access to medical and pharmacy coverage and containing health care costs. Data analysis helps them negotiate that narrow passage, but the trick is obtaining rich data and quality analyses. When a data analysis skims the surface, employers may fall short of their health care cost-containment goals. A comprehensive, strategic analysis can assist in several ways.
- Identification of cost drivers: A standard analysis identifies how certain types of care affect cost; a deeper look detects what causes treatment trends. For example, an employer attributed an eight-year cost decrease to a well-being initiative, until a more complete analysis assigned greater impact to workers retiring.
- Informed purchasing: Benefits trends sometimes entice employers to jump on board, like disease management programs focused on high-cost conditions like asthma. Targeted data analytics help employers understand not only the condition’s prevalence, but also whether costs are high enough to warrant a more robust disease management program.
- Benefits design guidance: Specialty medications are expensive, but rebates help offset the costs. When making decisions about design, employers should analyze the implications of favoring one type of medication over another. Direct costs may be lower in the near term, but the loss of rebate could mean paying more over time.
- Empowered decisions: Data help take the fear out of making decisions. Employers often shy away from choices that disrupt employee expectations and cause pushback, but this hinders innovative thinking. Data analysis can model the impact of benefit designs and pave the way for changes with lasting value.
- Transparency: Employers purchase health care at a discount that may obscure the true costs. A larger discount looks good, but analysis can identify the unit price on which it’s based. A greater discount may not mean paying the lowest cost.
Too often, employers turn to familiar tactics and a standard-level analysis that doesn’t keep health care costs in check. When employers routinely dig into data and explore the value of newer tactics, they can curb perpetual financial challenges. By cost-effectively getting the right treatments to the right people at the right time, they also increase employee well-being.
Insights Employee Benefits is brought to you by Gallagher