BHCG Monitor: Focus on Health Care Benefits

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BHCG Monitor: Focus on Health Care Benefits - Health Insurance Exchanges


Reshaping Health Care,
Best Performers Leading the Way

On May 29 Rose Nelson and Mark Bukowski of Towers Watson presented highlights of the 18th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care to the BHCG Benefits Subcommittee. The 2013 report, titled, Reshaping Health Care, Best Performers Leading the Way, identified the actions of the best-performing employers as well as current trends in health care benefit programs of U.S. employers with at least 1,000 employees. The survey was completed by 583 employers between November 2012 and January 2013. Survey respondents collectively employ 11.3 million full-time employees and are expected to spend approximately $103 billion on health care in 2013.

“Employers want to know what the survey’s best-performing companies are doing to achieve much lower cost increases compared to the median respondent companies in our survey. Based on this research, we know the best-performers are taking more aggressive actions, while using emerging strategies to improve delivery, cost management and employee accountability," said Rose Nelson, senior health care consultant for Towers Watson.

In summary, Dianne Kiehl, executive director of the BHCG commented, "This study confirms that the BHCG’s strategies are right on the money for achieving long term success."

The following excerpt from the report is reprinted courtesy of Towers Watson. To review the complete study click here.

Reshaping Health Care, Best Performers Leading the Way – Conclusion

While health benefit cost trends continue to stabilize, they are still significantly above the overall rate of inflation. With the excise tax looming, the pressure is on employers to better control costs. As more of that burden shifts to employees, employers are looking to other strategies — particularly through changes in vendor relationships, use of Account-Based Health Plans (ABHPs) and a greater emphasis on wellness — to manage costs.

Most employers are waiting to see how the Patient Protection and Affordable Care Act (PPACA) will play out before making radical changes to their plans, and most expect to continue providing health benefits over the next five years.

In our view, health benefits continue to be a differentiator for top organizations when it comes to attracting and retaining talent, but they should be viewed in the context of a total rewards program that carefully balances employee needs and employer costs, and leaves enough money in the budget for the most efficient employers to reward top performers.

The following strategies offer employers a way to manage health benefit costs, prepare for the PPACA, encourage employees to take an active role in their own health and well-being, and mitigate risks.

Strategies for Long-Term Success

Take a strong hand in financial management

Take steps to improve efficiency, including:

  • Use data and metrics to understand the cost drivers of your health plan, vendor efficiency and population risk profile.
  • Analyze health management programs designed to address population health risks, and evaluate ROI and cost savings.
  • Negotiate financial arrangements with your vendors, including pharmacy benefit managers, that include risks for both parties.
  • Audit claims and clinical programs to ensure plan designs and programs are administered appropriately.
  • Develop a workplace culture that holds employees accountable for managing their health.

Understand the excise tax and your options for addressing it

The purpose of the excise tax, which starts in 2018, is to lower the high cost of employer-provided plans. The government believes these high-cost plans lead to the overuse of the health care system and fuel rising costs. If you have a high-cost plan, now is the time to recalibrate your health care strategy to lower costs and avoid the excise tax. This will mean:

  • Restructuring your plan
  • Adopting ABHPs
  • Using spousal surcharges and dependent tiers
  • Emphasizing accountability in year-round health care decision making
  • Engaging employees in programs that promote healthy choices and responsibility for their health
  • Restructuring and rethinking retiree health care
  • Ensuring cost and quality transparency from vendors and providers

Keep an eye on the development of new delivery channels for health benefits

Consider whether the public or any of the emerging private exchanges might provide reliable alternative coverage for certain segments of your workforce. Pay special attention to the role public exchanges might play in covering pre-65 retirees, part-timers who work 30 or more hours a week, and lower-paid employees who might be eligible for subsidies. Watch the actions of competitors and leading companies in other industries.

Rethink retiree medical

Review your retiree medical in the context of your total rewards philosophy, and reconsider your role in providing this benefit. Even with employer contributions, the cost of retiree medical is becoming unaffordable for many workers, especially those not yet eligible for Medicare. Consider the benefits to both you and your employees of the public exchanges opening in 2014, which offer guaranteed coverage at likely lower costs. With the improvements in Medicare (especially drug coverage), take the opportunity to review your Medicare supplement plans. Finally, encourage active employees to invest in tax-advantaged medical savings accounts (HSAs and HRAs) that can be used in retirement.

Consider a total-replacement ABHP — and recognize that not all ABHPs are created equal

ABHPs can be very effective in helping to control both employee and employer costs, but long-term success is dependent on a comprehensive approach that emphasizes employee and provider accountability, cultivation of smarter health care consumers and taking advantage of the rapidly changing provider marketplace. Align your ABHP strategy with your health management strategy, and consider incentives and penalties to encourage the right employee behaviors. Encourage employee enrollment in your ABHP by tying your contributions to their HSAs and HRAs. Stress the tax and retirement savings advantages of those accounts in employee communications. Rethink subsidies for dependents. Finally, consider making an ABHP your only plan, and offer low premiums, reasonable deductibles and attractive contribution strategies. Remember, significant employee enrollment is key to the success of an ABHP. And don’t forget spouses: Extend your incentives and communications to them as well.

Influence engagement through employee education and communication

To overcome poor employee health habits — one of the biggest challenges to maintaining affordable benefit coverage — develop a culture of health. In addition to working with vendors to improve employee health through better information on health outcomes and cost, consider social media and incentives to drive change. Use behavioral techniques such as online discussion groups and games, team-based and individual competitions, online and in-person classes, and other strategies that encourage healthy behaviors.

Consider biometric and achievement standards initiatives

Go beyond providing incentives for participating in biometric screening. Provide meaningful rewards for employees who meet health improvement goals such as losing weight or quitting smoking. Consider following the lead of companies that charge penalties to smokers who do not enroll in smoking cessation programs. Involve spouses as allies in reward programs.

Emphasize accountability and vendor partnerships

Leverage the PPACA’s reform provisions (value-based purchasing, ACOs, bundled payments and medical homes — all targeted at improving quality and efficiency) to lower your costs. Implement performance-based contracts with vendors and set specific performance targets. Differentiate cost sharing for use of high-performance vendor networks, and offer incentives and penalties to providers to improve quality, efficiency and health outcomes. Require vendors to share information on care outcomes and costs to guarantee your employees have access to quality information they can use to make their health care decisions.

Get in front of the specialty pharmacy trend curve now

More employers are becoming acutely aware of the impact specialty drugs have on their total health care spend and in particular, their pharmacy spend. However, a relatively small number of employers actually know how much they spend in this area. Specialty drugs are trending at an exorbitant rate relative to traditional products, and it is estimated that employer spend in this area will double in the next three to five years. In light of this, employers should understand their total specialty pharmacy cost exposure and explore new strategies to address this fastest-growing area of pharmacy, including utilization management, site-of-care optimization, specialty pharmacy networks and formulary management.

Take advantage of new care delivery models and treatment settings

Follow the progress of companies that are experimenting with lower-cost alternatives to doctor visits and high-cost emergency rooms. Consider offering onsite health care (e.g., a clinic that provides preventive, primary or urgent care) in at least one location. Explore telemedicine (remote monitoring and real-time interactive services that leverage mobile collaboration technologies) for professional consultations. Monitor the experience of the technology industries that have been early adopters of telemedicine.

Consider your health plan in the context of total rewards

Are you using your rewards to drive employee engagement and organizational performance? If so, what role do your health benefits play? Your health care costs may be depleting resources that could be better spent elsewhere, such as on performance bonuses, base salary or any of the other components of a total rewards program. By making these tradeoffs transparent to employees, you can help them understand the impact that increasing health care costs have on rewards and benefits.

Adapt the strategies of best performers

Best performers use a variety of these strategies. The key is to first understand your costs, employee demographics and overall employee health profile. Armed with that information, you can begin to understand how the PPACA will affect your current health plans and your employees. For example, how many of your employees will fall into the part-time category? Will any employees be eligible for a subsidy? Is your plan high cost? If so, how will you avoid the excise tax? Once you’ve identified areas to target for improvement, you can work with vendors and providers to develop a strategy that focuses first on your most pressing issues. Build in metrics so you can track the progress of your initiatives.

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BHCG Monitor: Focus on Health Care Benefits - April 2012