Future of Employer-Sponsored Healthcare Plans

Opportunities and Strategies to Optimize Cost Containment and Management

Business Concept: Employee Benefits Word Cloud

By Christine Cooper, CEO of aequum LLC

Employer-sponsored benefit coverage has been a central part of U.S. health care for more than 80 years. Currently more than 155 million Americans are covered by employer-sponsored programs. These plans are valued by employers and workers alike for the adaptability and access to medical care they provide. In recent years, however, the lives of American workers have changed dramatically – both directly and indirectly impacting access to affordable, quality healthcare. Yet even during this period of cost inflation, opportunities remain for plan sponsors and members to optimize cost containment through proactive healthcare management.

Cost, Cost and Cost

The one-to-five year outlook for employer-sponsored health plans is rapidly increasing costs. Research by the Kaiser Family Foundation (KFF) shows that many employers currently offer better coverage than they can afford. Once adjusted for health care inflation, this can become an unsustainable financial risk. 

In the survey, large employers were asked about the future of employer-sponsored health coverage. More than 300 executive decision makers at organizations with over 5,000 employees responded. The majority (87%) believe the cost of providing health benefits to employees will become unsustainable in the next five to 10 years. 96% of large employers agree that the high costs of offering healthcare to their employees is excessive.

Two solutions were most favored: Government action and implementing a cost-controlled health benefit.

New federal legislation is already in place to support employer-sponsored health plans with added levels of insight, protection, and fairness, as well as opportunities to implement cost management strategies. Beyond simple compliance, those employer sponsored health plans that decide to respond strategically will experience a noticeably different one–to-five year future. Changes will involve reevaluating data relating to traditional health coverage to reconsider and reshape levels of employer financial support.

Some employers will: 

  • Recognize that for the last five decades, the median tenure of workers has been less than five years, meaning that many investments in wellness and coverage are likely to benefit the organization only in the short term.
  • Intentionally place participants at some risk when making decisions, so that the selection of providers, treatment plans, treatment facilities, focus on health and wellness/productivity, etc. can differentiate the outcome – in terms of health and financials.
  • Change health care communications, with messaging that confirms the value of participant involvement in advance of securing services as part of selection decision-making.
  • (Re)Introduce healthcare consumerism – coordinated with the adoption or enhancement of Health Savings Accounts.

Taking Advantage of Pricing Transparency 

Rising inflation and its effect on healthcare costs and spending has put price transparency in the spotlight. As of January 1, 2021, the Centers for Medicare and Medicaid Services (CMS) mandated that U.S. hospitals provide clear, accessible pricing information online about the items and services they provide. Under CMS guidance and final rules, hospitals are required to make pricing information available in machine-readable format and in a list of shoppable services that a patient can schedule in advance. This is intended to make information accurate and easier to access for health service consumers to compare prices, estimate the cost of care, and confirm market value. 

Reference-Based Pricing as a Most Valuable Provision

Even with greater transparency, significant price variations can still exist across hospitals and providers for standard procedures. To mitigate this, many self-funded health plans have adopted reference-based pricing (RBP) strategies. Designed to moderate excessive hospital costs, RBP establishes a benchmark fee schedule and payment ceiling instead of negotiating fees with a provider network. Plan sponsors and participants benefit from the consistent application across all providers and health networks. There is, however, a potential risk to RBP that health plan sponsors and participants need to be aware.

The enforcement of certain provisions of the No Surprises Act, legislation designed to protect patients from unexpected medical expenses, have been delayed by the Department of Health and Human Services, as well as by on-going litigation seeking to clarify elements of the legislation, particularly elements of the Independent Dispute Resolution (IDR) process. The IDR process remains unresolved and is subject to a temporary good faith compliance standard.

However pure RBP plans should remain unaffected by this rule. That’s because there are no out-of-network claims, nor is there any determination of a median in-network rate. Adopting a pure RBP plan that puts the patient in the driver’s seat as a health care consumer is the most effective way to respond to the legislation. Just as important, deploying RBP may avoid unreasonable or excessive provider charges – potentially lowering both the cost of coverage (employer and employee contributions, over time) and employee point of purchase cost sharing (deductibles, copayment, coinsurance).

Health Savings Accounts as a Cost-Management Trend

Many workers today are unprepared for regular household expenses, let alone medical expenses. Employer-sponsored health plans offer opportunities to capitalize on cost savings initiatives that can fully optimize the value of health plans by better preparing participants for regular medical expenses, including cost-sharing amounts like deductibles, copayments, and coinsurance. For plan sponsors, the least burdensome option is a Health Savings Account (HSA) strategy. 

HSAs can cover out of pocket medical costs in the current and future years, retiree medical expenses including Medicare premiums, provide for retirement income, and provide survivor benefits. Additionally, HSA assets receive America’s most valuable benefits tax preference – contributions are pre-tax for federal income tax purposes, same for most state income taxes, as well as FICA (Social Security) and FICA-MED (Medicare). Accumulated earnings are tax deferred and payouts for eligible medical expenses are tax free. As compared to health Flexible Spending Accounts (FSAs), more medical expenses qualify and there is no “use or lose” or forfeiture provisions. Unspent money rolls over end-of-year, available for future health expenses. 

Your Medical Billing Partner

Today, employer-sponsored health plan members benefit from billing partnerships that provide data insights through software and data-driven solutions. Real-time price information of the true cost of care enables plan sponsors and members to make the most advantageous cost-benefit decisions regarding treatment options. 

The right medical billing partner will be an agent of change, embracing innovation and advocating for “what is fair and just.” The right partner will also provide value-added services through turnkey solutions, innovative plan designs, administrative and compliance support, as well as legal representation of participants. This support can provide invaluable guidance to navigate new federal and state healthcare regulations, identify areas to lower risk, reduce costs, and maximize value and returns on cost savings.

About The Author

Christine Cooper is the CEO of aequum LLC and the Co-Managing Member of Koehler Fitzgerald LLC, a law firm with a national practice. Christine leads the firm’s health care practice and is dedicated to assisting and defending plans and patients.

Cool Photos from Depositphotos