Health Care No Longer Business as Usual

As health care costs continue to rise and the economy worsens, many family owned businesses, and other small employers, are struggling to find a way to stop the double-digit medical insurance increases while, at the same time, keeping their employees whole. However, some businesses have already achieved manual medical trends that are low single digit, flat or in fewer cases negative.

As health care costs continue to rise and the economy worsens, many family owned businesses, and other small employers, are struggling to find a way to stop the double-digit medical insurance increases while, at the same time, keeping their employees whole. However, some businesses have already achieved manual medical trends that are low single digit, flat or in fewer cases negative.

How do these best performing companies do it? Do they slash benefits and leave their employees out in the cold? Actually, they don’t. Rather, these employers have adopted best practices that cause their health care costs to fall below the norms. They are companies that put their employees first, creating a culture of health in their organizations and turning their medical plans back into "health" plans.

What we are learning, with increasingly transparent claims data, is that indiscriminate increases in deductibles and copays have a very limited effect on lowering utilization. Instead of hacking away at the medical plan—death by a thousand cuts—these best performing employers are relying on data, strategic initiatives and employee engagement to attack the real culprit in today’s runaway medical utilization: chronic illness. By most accounts, chronic illness, and its associated causes and conditions, accounts for 70 percent of health care claims.

One of the key strategies employed by many of these top performing health plans is a concept called Value-Based Health Care Management (VBHM). In a nutshell, this strategy is based upon the concept that you get what you pay for. Unfortunately, in health care today, most employers are paying for higher utilization and lower quality of care. In the end, most employers’ attempts to reduce costs by spreading increases in copays and deductibles across an entire employee base are actually raising point-of-care costs to the level where many plan members are going without treatment for chronic conditions. Also, many chronic conditions are going undiagnosed because of the lack of preventive and early diagnostic screenings. Lack of care and delayed diagnosis for chronic illness is the breeding ground for catastrophic claims and out of control costs.

VBHM takes a different track. It puts the health and well being of employees and their families first by managing quality of care, access to care and the effectiveness of care. You can’t manage what you don’t measure, so companies that implement these strategies learn to look deeper into their health care data warehouse, intuitive software and predictive modeling.

If you’re a smaller company, you might also be thinking that such data is unavailable or, at best, unsophisticated. It’s quite true that most insurers are reticent to share small employer claims utilization information. This reluctance to share data has condemned many smaller family-run businesses to make uninformed decisions around what changes to make to their plans. However, some insurers are beginning to see the value in sharing some data, so vendor selection can become a key objective for successful implementation of VBHM.

The creation of a culture of health, necessary for short- and long-term cost reduction, goes beyond the VBHM strategy. Communications around disease prevention, healthy life choices, early detection, self care, provider quality, and much more are also necessary. Wellness programs that truly engage employees and their dependents are the third leg of the cost management stool. Health assessments including biometric screening—testing for key risk factors—should be incorporated in any effective wellness program.

There is no doubt that these initiatives require a longer term approach to reducing health care costs, but it is clear that they are the only way to effect long-term cost reduction, and employers need to start now. There are, however, very specific high impact ideas to help brace against these uncertain economic times.

A recessionary business environment is causing many employers to take a harder look at health care. Many cost reduction strategies that may have been rejected just 6 months ago by some employers are now on the front burner for consideration. These include Health Savings Accounts and Health Reimbursement Arrangements. Properly designed Consumer Directed Health Plans like these can make an immediate impact on health plan costs. Care must be taken to ensure that these plans are designed in such a way that consumerism is maximized and barriers to care and prevention are not introduced. Consumer directed health care is not just high deductible health care. It is a process of employee engagement and ownership.

Other innovations are important to consider as well. Alternate funding, appropriate risk transfer, avoidable claims strategies, eligibility review initiatives, Insured Participation Plans (IPPs), Medical Expense Reimbursement Plans (MERPs), network discount analysis, insurer performance guarantees, and aggressive carrier negotiation are some key targets of any effective cost reduction opportunity analysis.

Family-owned business and other small employers have a unique opportunity to engage employees in a caring way. With such employers, a higher level of opportunity exists to create a culture of health and to redefine the medical plan into a program that truly encourages health and well being. Paternalistic organizations recognize that trust among employees in their organization is the currency used to get things done and achieve goals. This trust can become the platform to encourage this first generation of reluctant health care consumers to take a more active interest in improving their overall health. The dividends can be astounding—improved productivity and higher quality of life, while lowering health care costs.

Whatever your company does in today’s health care and economic environment should be contoured to your company’s philosophies, financial goals and employee needs. Employees are finding that they can continue to provide a significant level of benefits, regain the confidence of their employees and still reduce current costs and future trends.