Just getting comfortable with the idea of a high deductible? Finally found a great in-network doctor? Well, if you’re one of the nearly 27 million Americans who work for a Fortune 500 company, your health benefits might be undergoing yet another overhaul.
According to the 2018 KFF Employer Health Benefits Survey, health insurance premium increases outpaced the economy and employee wages over the past year and decade. When employers reach about 500 employees, they typically begin to self insure — meaning they’re on the hook for the bill when their employees and their families exceed their deductible.
This trend has created a pressing need for employers to find more cost efficient models — and they’re starting to go outside the traditional provider/insurance model.
Here are just a few of the innovative (and sometimes revolutionary) ideas we see top employers considering and implementing today:
1. Direct contracting for primary care
Companies like One Medical and Vera Whole Health (among many other local provider groups) are going outside the traditional model and offering a Costco-style service that cuts out the middleman (insurance carrier) and provides basic primary care services to employees and their families.
We’ve seen this trend in the individual market for years, but with companies like One Medical marketing directly to employers, direct contracting is becoming more and more common in the employer space.
By pairing direct contracted primary care with COEs (a trend we’ll take a closer look at below), employers are creating an almost HMO-type experience, but on their own terms. And why not? If you are paying for 10,000 employees and their families to get primary care services every year, you’re going to want the bulk discount.
2. Centers of Excellence
Similar to the direct primary care model, this practice creates financial incentives (lower co-pay, discounted rates, etc.) and even sometimes requires employees and their families to use certain facilities, known as Centers of Excellence (COE).
Whereas direct primary care is focused on the physicians and clinicians, a COE strategy focuses on facilities. Typically, employers seek to drive utilization of facilities that are high quality and are willing to give them a favorable contracted rate for services (again based on anticipated volume).
One early adopter of the COE strategy is Walmart, which employs more than 1 million Americans.
3. On-site or near-site clinics
Similar to the direct contracting strategy, large employers with concentrations of employees in one region are actually bringing healthcare services in-house by contracting with on-site clinic vendors like Crossover Health and Premise Health.
These clinics — almost like the nurses office you might remember from elementary school — allow employees to access care anytime they need it without even leaving the office. This reduces the cost for employees and employers but also decreases absenteeism, as employees can get care quickly and efficiently without making an appointment, sitting in a waiting room, or filling out piles of paperwork.
Near-site clinics have basically the same value proposition as on-site clinics, but allow employers who are not quite big enough to justify having their own entire clinic to share with other employers in their area.
4. Virtual care and telemedicine
Unlike the strategies explored thus far, virtual care has become popular across employers of all sizes and even amongst individuals.
Virtual consults with physicians, nurse practitioners, and specialists via services like MDLive and Teladoc can be used to address common health concerns and to triage more complicated ones. Just like other doctors you might consult with in person, virtual care providers can make referrals and write prescriptions.
The difference? It’s less expensive for everyone involved. Many employers see it as a way to increase access to critical primary care and redirect employees with minor illnesses and injuries away from the ER — a win-win for everyone, as long as employees remember to use it.
5. Reference Based Pricing
It’s not a new idea, but it might finally be gaining some traction: Reference Based Pricing (RBP).
RBP is yet another way to circumvent the traditional carrier/provider health care delivery model — this time by setting a reimbursement rate for different procedures (usually based on a percentage of the Medicare rate) and leaving it up to the employee to find a doctor who will accept that amount of cash to perform the procedure.
As you might have guessed, this can be a difficult model to pull off, especially because there’s no contract requiring a provider to (1) accept this form of reimbursement or (2) keep the rate to the agreed upon amount — which are the two protections consumers generally have through their insurance carrier.
One of the biggest risks in this model is a physician and facility agreeing to perform the procedure for the set amount and then “balance billing” the patient after the procedure is complete. There could be any number of reasons this might happen, ranging from a legitimate complication that caused a surgery to take longer than expected to much more contentious disagreements and even legal disputes.
Add to that the fact that there is currently no existing directory for consumers to find providers who accept RBP, and it’s clear that RBP is at the very forefront of innovation. Companies like Zelis (in partnership with us here at Amino) are working hard to help bring it to the mainstream.
6. Narrow networks
Unlike the strategies explored thus far, which are outside the traditional healthcare delivery model, narrow networks are a subset of a traditional Preferred Provider Organization (PPO).
Providers are chosen for inclusion in the narrow network, typically by the carrier, because they have been identified as high value choices. Increasingly, insurance carriers are marketing PPOs with built-in narrow networks to discourage employers (in many cases their largest customers) from moving to alternative models, such as direct contracting.
Some employers wonder if these agreements are really made at an arm’s length. This uneasiness has spurred innovative employers to partner with forward thinking Third Party Administrators (TPAs) to design unique plans in which a narrow network is defined based on the physician’s cost effectiveness and level of experience. In this model, employees are incentivized, typically by lower out-of-pocket rates or rewards, to choose providers within the narrow network.
The key to making these strategies effective
So are these strategies effective? For some employers they certainly are, but others might feel they’re more trouble than they’re worth. The strategies all make sense on paper — in the real world, however, there are challenges.
Ultimately, large employers have to consider each decision as a part of an ecosystem they’re creating in which an employee can receive the right care at the right time for a reasonable rate. According to leading population health scientists, one of the most important things we can do to make healthcare more efficient for everyone is guide people to appropriate care settings — don’t go to an ER if an urgent care can handle your issue, don’t go to an urgent care if a virtual visit can address your concern.
But how is an employee — usually not an expert in healthcare — going to know which setting is most appropriate? Amino believes employees need tools to make it easy to get to the best care option (what we call a Smart Match) for their need. We think of Amino’s Guidance tool as the front door to a healthier, wealthier healthcare experience. Any plan design an employer concocts can be great, but only if its utilized properly — and that’s just what we’ve set out to help people do.
Let’s take direct contracting for primary care as an example. What if an employer is saving money through direct contracting, but every time the PCP refers out for imaging, they send employees to the most expensive hospital instead of a much more cost-effective freestanding imaging facility? The employer might save a little on each PCP visit, but their savings will be completely wiped out by uninformed referrals to expensive imaging centers. Not only do we need to give employees great tools, but we must empower the whole ecosystem so that each strategy is effectively feeding into the other.
As the leaders of innovation in healthcare, large employers in America must always keep this in mind. Point solutions are great, but we must always remember that employees access the healthcare system in a variety of ways. At Amino, we believe in building an ecosystem that always guides employees to the highest value corner of their network, regardless of when or how they search for care.