As the latest Mercer National Survey of Employer-Sponsored Health Plans shows, more employers are offering employees tools to make more informed healthcare decisions. Among the largest employers (those with 20,000 or more employees), 28% provided transparency tools through a specialty vendor in 2016, up from just 15% two years ago. An additional 62% say their health plan provides some type of transparency tool.
But some employers are taking consumerism a step further and actually paying employees for using these tools to select lower-cost healthcare services. As this Wall Street Journal article describes, the states of Kentucky and New Hampshire and Jackson Health System are three employers taking this approach.
Vitals, Inc., a healthcare comparison shopping tool used by the state of New Hampshire, estimates employers saved $12 million by using their tool on “shoppable” procedures (e.g., mammograms, MRIs, CT scans and blood work). More complex procedures for which people are understandably less price-sensitive, such as cancer treatments or brain surgery, aren't included. Typical savings for employees can range widely from $25-$500, often paid in checks or gift cards, according to Vitals.
Transparency tools can be a key source of cost and quality information, but these tools need to be visible and user-friendly to gain traction with employees and thus generate savings. Effective communication about the tools are essential, but you might also consider more innovative approaches like those used by the employers above to incent smart shopping behavior in your population.
This post is part of our “Driving Transformation” series, in which Mercer consultants share key take-aways for employers from the 2016 Oliver Wyman Health Innovation Summit, a recent conference hosted by Mercer’s sibling firm, management consultant Oliver Wyman.
In this blog post, Oliver Wyman’s Terry Stone discusses how to fix the healthcare consumer experience. Despite abundant effort to address the industry shortcomings, she asserts that we haven’t spent enough time addressing the root-cause issues. Success lies in understanding the consumers’ needs and solving their problems. More than ever before, healthcare consumers expect us to stop making the complexity of the system their problem. So the next time you are addressing a change to your health plan, ask if the change makes it easier for your employees to access the right care at the right time.
This post is part of our “Driving Transformation” series, in which Mercer consultants share key take-aways for employers from the 2016 Oliver Wyman Health Innovation Summit, a recent conference hosted by Mercer’s sibling firm, management consultant Oliver Wyman.
At many points throughout the conference, with its deep focus on a “consumer-led transformation” of health care, I was challenged to think about a fundamental element of such a transformation: consumer behavior change. Can we really teach healthcare consumerism skills? Can we instill a sense of shared accountability for health within a patient, who may have little or no financial “skin in the game”? And if we’re successful moving the needle on healthcare consumerism skills and sharing responsibility for prudent healthcare decisions, can these skills and responsibilities be called upon in the exceptional situations where healthcare is complex, emotional, and high risk? After all, these are the situations that account for the majority of healthcare costs.
It’s a tricky question, and we don’t think the answer is a simple binary yes or no.
We do believe that healthcare consumerism skills are teachable, in many (often lower cost) situations. With a growing number of employees and their families now covered in high-deductible health plans, healthcare consumers -- aka patients -- have significantly more financial responsibility than in the past. And, in fact, they are starting to use resources like cost/quality transparency tools, expert medical second opinion services, and plan design decision support. In situations where risk is relatively low or average, as it is about 80% of the time, we see solid evidence that the consumer can make prudent decisions. In the oft-used example of shopping for an MRI, users can review a list of reasonable alternatives and make a thoughtful choice that is responsive to various price points. Assuming they haven’t yet met the annual deductible, they are shopping for care and using dollars in their wallet (or HSA wallet) to pay, and are motivated to be a responsible purchaser of healthcare services. We’ve made tremendous progress in this area over the past five years and believe that the next generation coming into the workforce will only accelerate this type of consumerism.
But, what happens when care is complex, emotional, or a matter of life or death? In this scenario, as I recently asserted in an interview with the Associated Press, healthcare consumerism skills cease to matter. That’s partly because the healthcare market itself does not follow traditional economic principles. High quality does not equal high cost in healthcare – in fact, it’s often the complete opposite, since poor care leads to bad outcomes that require more care. And, just as important, rational consumer behavior does not apply in times of healthcare crisis, even for those who have mastered basic healthcare consumerism skills for routine, transactional healthcare decisions. The intrinsic motivation to shop wisely when spending personal dollars doesn’t apply either, since deductibles and out-of-pocket limits will be met.
What should the consumer care about in these situations? Quality. In fact, quality should matter most both to the consumer and to the plan sponsor. The trouble is that consumers don’t always know how to assess quality, how to reconcile competing quality measures, or how to decipher even basic quality information. The reality is that care coordination in these high-cost complex episodes is often fully directed by a provider or care team, with little room for the consumer to intervene and try to steer decisions. Given this dynamic, plan sponsors are uniquely positioned to play a role since the traditional expectations of consumer behaviors cannot be called upon. Strategies for plan sponsors include using quality networks, offering care coordination support, and enhancing case management. Since intrinsic motivation to be a prudent healthcare cost shopper doesn’t apply in the most costly situations, plan sponsors can create an environment where only “good options” are available to the consumer. With this in mind, Mercer believes that a consumer-led healthcare transformation requires alignment and support provided by the critical partner of plan sponsor.
Navigating healthcare is a challenge. The market has responded by bringing together an array of tools to guide consumers. This is a fictionalized account of one patient’s journey.
So I wiped out on the bike today in the strangest possible way. I was training for this year’s NYC Five Boro Bike Tour when I got distracted by a man on a unicycle juggling bagels and lost control. I can’t believe it! Only in New York. My bike is okay but I’m out of commission. I hopped over to the sidewalk and called an Uber back home. My right knee looks pointed inwards and the Internet says that could mean a torn ACL. I’m going to ice my knee, take some Advil, and hope I’m wrong.
It’s been three days now and I still can’t use my knee in any way. So I bit the bullet and took an Uber to the ER. I’m getting sick of sitting around in my apartment. Now I’m lying here in bed waiting for the nurse to come back and fit me with a brace. The doctor told me I was right about the torn ACL and that I should go home and schedule surgery for two weeks from now. I’m so scared about the idea of surgery and I don’t even know how I’ll be able to pay for it.
I tried searching for an Orthopedic Surgeon through my insurance portal and more than 800 doctors popped up. How am I supposed to know which one is the best for ACL surgery? Too frustrated to even write about it.
I tweeted out to the cycling community that I got my NYC Five Boro Bike Tour prize early and asked for a recommendation for a surgeon. Of course I got about 100 different names, which only made me more confused. Then Anna from work suggested I use MD Insider, which my company provides. I narrowed the list to about 30 doctors who specialize in ACL surgery and were on my plan. I sorted by quality scores and then called the top three to see who had the best schedule. I feel better already just having an easy, logical way to find a doctor. Surgery in 12 days!
I got a bill from the ER for $1,300 and literally fell out of my chair when I opened the envelope. That’s a month of rent! And all the ER did was confirm what I had found online—nothing special. In the future, I’ll definitely go to urgent care. I just had NO IDEA how crazy expensive the ER is.
After laying on the floor and moaning for a while, I remembered our company also provides a service called “Health Advocate.” I wasn’t sure that was, but it sounded like something I needed! So I made a phone call, and guess what? My advocate was a real human, not a robot! She helped me negotiate down the cost of the visit to just $450. I can’t believe I’m even saying “just,” but it obviously could have been worse. Lesson learned.
The surgery yesterday went well but I was too groggy to form coherent sentences until today. My surgeon was fantastic and put all my fears to rest. She was in my plan’s network so my out-of-pocket portion was more manageable than I had anticipated. If all goes well I should be back on my bike in a month. Plenty of time to get ready for next year’s Five Boro Tour!
Think I was being overly optimistic. Now it’s a week later and I’m still in a lot of pain from surgery. My health advocate called me to check up on me a couple of days ago and I told her I was fine, because I still had pain meds then. I took my last pill last night and still need more. My cyclist friend Lia offered me her leftover topical lidocaine (how can she have anything leftover??) and I said no because I figured my surgeon gave me a one week dose for a reason. I’m also scared of becoming an opioid addict, because addiction runs in my family. It sounds preposterous now that I’ve written it down, but gimme a break, my knee hurts! I just want to bike.
The pain is getting better. I’m glad I decided to wait it out instead of grabbing Lia’s leftover meds. Today I went for a quick spin on my bike. I made sure to bike on flat terrain and the ride went well! I’m a little poorer now—though it could be worse—but at least now I’ll have a good story to tell at the post-race party next year. Still can’t believe the guy was juggling perfectly good bagels.
More employees moving into lower-cost medical plans contributed to one of the smallest increases in total health benefit cost per employee in decades: 2016’s average increase of 2.4% is the lowest since 2013 and, before that, since 1997. According to Mercer’s survey, total health benefits cost averaged $11,920 per employee in 2016. This cost includes both employer and employee contributions for medical, dental and other health coverage, for all covered employees and dependents. Small employers (10-499 employees) again reported lower cost -- $11,271 -- compared to $12,288 for large employers with 500 employees or more.
While many factors contributed to the low cost increase, including general inflation hovering around 1%, one that is drawing attention is the accelerating movement of employees into high-deductible consumer-directed health plans (see this article in the New York Times). CDHP enrollment has been rising for a decade and in 2016 jumped to 29% of all covered workers, up from 25% in 2015.
Adding CDHPs has been a key strategy for employers concerned about the ACA’s excise tax on high-cost plans. Coverage in a CDHP that is eligible for a health savings account (HSA) cost 22% less, on average, than coverage in a traditional PPO plan among large employers, even when employer contributions to employee HSA accounts are included. The largest employers have moved the fastest: Among organizations with 20,000 or more employees, 80% offer a CDHP and enrollment jumped from 29% to 40% of covered employees in 2016.
Despite the CDHP’s lower cost, most employers continue to offer it as a choice and not as a full replacement. While 61% of large employers now offer a CDHP (up from 59% last year), just 9% offer it as the only plan available to employees. This suggests that most of the latest growth in CDHP enrollment came from employees choosing to move from a traditional PPO or HMO. For employees, the difference in the cost of coverage can be substantial – on average, more than 30%. Among large employers, for employee-only coverage in an HSA-based CDHP, employees contribute $84 per month on average, compared to $132 for PPO coverage. For family coverage, the difference is $321 vs. $467. In addition, 75% of large employers offering HSA-eligible CDHPs make a contribution to the employees’ HSA; typically $500 for an individual.
For employees who can manage the high deductible, a CDHP can be a financially smart move. Employers can make it easier to choose a CDHP by offering resources to help employees manage their spending on healthcare. In our next post on the survey findings, we’ll look at the big increase in offerings of telemedicine, one resource to help employees hold down cost before they hit their deductible.
Mercer recently released key findings from our 2016 National Survey of Employer-Sponsored Health Plans, a nationally representative survey of US employer health plan sponsors with 10 or more employees. More than 2,500 employers participated in the survey in 2016, making it the largest of its kind. The complete survey report and data tables will be published in March 2016 (click here to pre-order), but throughout the year and starting now we will post findings on select topics here.
It is hard to argue that employers have not done a pretty good job in recent years managing cost. The threat of the excise tax obviously had something to do with that, and keeping health benefit cost growth to about 4% annually has required some effort. We at Mercer think we have helped our clients make some great strides in the fight to manage health care cost and improve quality with initiatives like Mercer Complete Care, a personalized advocacy and clinical care solution, and our new Specialty Pharmacy PBM Carve-out offering. We have also implemented Quality Improvement Collaboratives (QIC) in several metropolitan areas across the country to bring employers together with providers to improve the quality of hospital care.
But that is not enough. There is still so much to be done and we believe employers must be the agent for change – after all, they provide health coverage to over half of Americans! When we look back over the past 10 years, the greatest strides in health benefits were driven by employers.
Our challenge to our clients and to the entire employer community is to focus on what we call the “four vitals” for healthcare transformation:
- Pay for value – Aligning reimbursement with value, not volume.
- Drive to quality – Delivering the right care at the right time, in the right setting, error free.
- Personalize the experience – Leveraging better data and technology to engage employees in the right behaviors, every day.
- Embrace disruption – Injecting change into the system, with internal stakeholders and external partners, to be future-ready.
Sharon Cunninghis, North American Leader of Mercer’s Health business said it best: “Employers are pivotal players in today’s healthcare system, yet their role has remained remarkably passive. In fact, employer-provided coverage translates into a nearly one trillion dollar annual spend. The time has come for employers to work with other key stakeholders to translate this potential leverage into actual market transformation – and we see our point of view as the roadmap.”
And if lower cost trend and better outcomes are not enough of an incentive to take charge and be one of the leaders, remember that a healthy workforce is strongly aligned with increased productivity, reduced absenteeism, higher retention, and better overall engagement – key ingredients of business success.
Time for us all to up our game.
For more on this, check out our article in BRINK News.
As discussed in an earlier post, the EpiPen controversy has put issues surrounding drug pricing very much in the public view. But while ensuring the affordability of life-saving pharmaceutical products deserves attention, it’s a complicated issue with many stakeholders. There is little government guidance for employers and their vendors on benefit design, such as which drugs to include on high-deductible health plan preventive drug lists so that they bypass the deductible. While adding the EpiPen might seem like an obvious step, there are many drugs that fall into the gray area between prevention and treatment, and for any individual employer to try to draw that line could put them at risk. More guidance from the government would help in the short-term, but ultimately the affordability problem will only be solved by addressing underlying drug prices.
Over the past few years, there have been some short-lived alternatives to the EpiPen, but the only one currently available is an authorized generic for Adrenaclick, which may not be significantly cheaper than EpiPen and is in limited supply. While we’re already seeing activity among other drug manufacturers looking to get a competing product on the market, it will take some time. Mylan’s generic version of the EpiPen, however, will likely be available within a few weeks.
Here are some questions to discuss with your PBM or health plan now, to ensure your members have the access they need to this product and you’re controlling spending to the extent possible.
- What is the status of EpiPen and the authorized generic of Adrenaclick on the formulary? This is important because formulary status can determine drug coverage, the amount of patient contribution, and what manufacturer rebates might be obtained.
- How are any earned drug rebates being accounted? Rebates from the drug manufacturer may be one critical aspect of how to recoup some of the plan sponsor’s expenditures, so the primary payers should ensure those rebates are completely flowing back to them.
- Is EpiPen on an inflation protection program? Such protection strategies are a growing trend in managing drug expenditures and they look to ensure that the pharmaceutical manufacturer have some type of price protection or cap on how much they can increase their pricing. Unfortunately, this type of pricing protection may only be associated with increasing the rebates to keep pace with the ingredient price increases; however, it may offer some relief to plan sponsors.
- Is a generic interchange available for EpiPen? For now, the answer is mostly no, but this will be an option to consider once Mylan’s generic version is actually available.
- Will the generic price points be better for employees than the negotiated brand price? Though generics traditionally are the lowest-cost option, if the generic does not offer a significantly lower price, the plan sponsor should explore whether the branded version, net of the rebate, is actually a lower-cost option.
- Are there programs to manage the quantities being dispensed? Such strategies are often applied to ensure patients are not stockpiling large quantities of a medications.
- Are there ways to better account for the drug manufacturer couponing efforts? As the drug manufacturers have been providing more coupons to cover the cost of their products, plan sponsors continue to struggle with how to account for copays patients actually do not pay because, for example, they are applied to the deductible. Although these coupon programs traditionally only benefit the patient, plan sponsors have begun to consider how they might benefit from this type of manufacturer funding, as they still pick up most of the cost for most drug therapies.
Finally, as you monitor availability and price, you may want to review employee communications as well. You may want to consider providing educational materials that provide resources for employees that need help with the cost of EpiPen. And, if plan members can save money by asking a physician to prescribe a generic as availability grows, that’s a message worth reinforcing.
Unless you’ve spent the last few weeks vacationing on an internet-free tropical island or remote mountain-top (if so, lucky you!), you’ve read something about the controversy surrounding the EpiPen, the severe-allergy drug injector sold by the pharmaceutical company Mylan. Since 2007, when Mylan acquired the EpiPen, the list price has risen from about $100 for a two-pack to about $600. There are virtually no alternatives on the market, and the medication is potentially life-saving – in other words, not optional. A grassroots social-media campaign, driven largely by parents of children with food allergies, pushed Mylan to offer a $300 “savings card” to commercially insured patients to reduce their out-of-pocket costs and to broaden the eligibility for uninsured patients to receive free EpiPens. What they didn’t do was reduce the list price for the drug, and the barrage of negative press continued, affecting Mylan’s stock price. The company responded by announcing they would introduce their own generic version of the product in a few weeks, at half the price. It will be the exact same product as brand-name version – which the company will continue to sell for the full price. Although drug companies have introduced generic versions alongside their own brand-name drugs to compete with other generics, it doesn’t appear that another generic epinephrine auto injector will be available in the short-term.
Although this move may take heat off the company, the reason Mylan didn’t just reduce the price of the brand-name drug is because they hope and expect that sales of the brand-name version will continue – because (as this New York Times article suggests) some doctors will keep writing prescriptions for it by name, out of habit; because pharmacists will have a financial incentive to sell the more expensive, brand-name version; and because consumers with the $300 savings card might get the brand-name version for free but have a small co-payment for the generic version. On the other hand, some PBMs and carriers may have negotiated prices for the brand-name that are lower than the generic price! Employers will need to talk to their PBM or health plans to understand the current pricing structure and how, now that the target has moved and moved again, to get the best deal for their employees and their organization.
This story shines a spotlight on the urgent need for regulation to address pharmaceutical price-gouging and the extreme variation in prices paid by different purchasers for the same drug. On the defensive, Mylan’s CEO called out high-deductible plans as the real culprit; in fact, they exposed unfair price increases that might otherwise have gone unnoticed, as they do in so many cases. But the EpiPen story also highlights a problem with consumerism: you can’t be a smart shopper if there is no alternative to a product that your life, or your child’s life, may depend on.
Way up there on the list of things not to like about the U.S. healthcare system is the extreme variation in prices charged for the same service from one provider to the next – variation that is very often unrelated to quality of care. While employers are tackling this problem in a few different ways, there isn’t a ton of data to show how well any of these strategies work. So I jumped on the recent New York Times article reporting on one mega-employer’s attempt to achieve more standard pricing while still allowing members to choose their providers – reference-based pricing. The employer in question is the California Public Employee Retirement System, or Calpers for short, and the experiment included 450,000 of its members.
Beginning in 2011, Calpers set a limit on the amount it would contribute to the cost of a number of elective procedures, including knee and hip replacement surgery, colonoscopies, and cataract removal surgery. They made sure there were some hospitals that met certain quality criteria that would provide the service at or below their maximum contribution amount. Patients who wished to get a procedure at a hospital charging more would have to pay the difference themselves. That was a strong incentive for members to go to the less-costly hospitals, and a strong incentive for hospitals charging above the maximum to lower their prices.
As described in the article, it’s hard to see the program as anything other than a success. In two years, Calpers saw a 20% drop in prices for the services with reference-pricing, while, according to the article, “typical health care prices paid by employer-sponsored plans rose by about 5.5%.” During that time they saved $6 million on knee and hip replacements, and $7 million on colonoscopies. Even better news: Researchers found no evidence that quality suffered as prices fell.
You might think results like those achieved by Calpers would send other employers flocking to this strategy. But our most recent survey found that just 13% of all large employers currently have reference pricing in place for some services, although another 18% say they are considering it (among the largest employers, the number considering rises to 29%). As with most good things in life, there are a number of caveats that go along with reference pricing. You need enough hospitals in a given market so that patients have a choice about where to receive care and hospitals have an incentive to reduce prices. You need the resources to assess quality and choice, to set fair reference prices, and to communicate the program to employees. You need employees who will be able to use the program to their advantage.
And even if you can check all these boxes, reference pricing will only be part of the solution. It addresses elective care – “shoppable care” – which only accounts for about 40% of healthcare spending (leaving a lot of price variation to be dealt with by other means). But it could be a good starting point. And for employers that don’t have the right market conditions or the resources to pull off a program like Calpers’, think about a Center of Excellence approach – another way to build value and transparency in the U.S. healthcare system.
Employee Benefits News posted a slideshow illustrating the differences between Clinton and Trump on the current state of healthcare in the US. Spoiler alert: there are not that many differences! The areas where they are aligned include:
- Cadillac tax – both want it repealed
- Cost – both think it needs to go down
- Prescription drug costs – both want Medicare to set drug prices
- Insurer consolidation – both oppose
- Transparency – both support
The two major differences are the ACA – Clinton supports with tweaks; Trump wants it repealed, mostly. The other is Medicare-for-all/single payer – Clinton favors the ACA; Trump wants to repeal the ACA and is “open” to some kind of free healthcare option or single payer system.
Trump has been vocal on two additional health benefit issues – purchasing insurance across state lines (check out my prior blog post) and support/expansion of consumer directed health plans and health savings accounts. Clinton has not publicly addressed these two topics so we are not sure if she is aligned on these, or not.
Likely not the last we will be hearing on this topic as the campaigns move full steam ahead.
This month, the International Federation of Health Plans (iFHP) released its 2015 Comparative Price Report, a look at medical prices per unit in private health plans in seven OEDC countries, including the US. While you can guess that most procedures, tests and scans cost more in the US, you might be surprised at the size of the discrepancies. Let’s take a look at the most common surgical procedure performed in the US – the appendectomy. According to the iFHP, the average cost of an appendectomy in the US is almost double the cost in the UK and quadruple the cost in Australia. While the report doesn’t explain the higher average US cost, it does offer a clue by showing how widely prices for this surgery vary within the US – from about $9,000 at the 25th percentile to about $33,000 at the 95th percentile. This degree of cost variation – when it doesn’t result in better outcomes – is why US employers have turned to transparency tools, reference-based pricing, and value-based care.
The report also showcases extreme pricing discrepancy for seven specialty prescription drugs, with the US typically paying much, much more. A well-researched article in the Wall Street Journal that appeared late last year does a great job of explaining how other countries manage to keep their drug spending under control. A lot of it comes down to bargaining power. Government-run health systems in countries like the UK and Norway have substantial negotiating clout with pharmaceutical companies. In the highly fragmented U.S. market, payers range from employers to insurance companies to federal and state governments – and Medicare, the largest payer for prescription drugs, is by law unable to negotiate pricing. For Medicare Part B, pharmaceutical companies report the average price at which they sell medicines to doctors’ offices or distributors; by law, Medicare adds 6% to these prices before reimbursing the doctors, and the plan member pays 20% of the cost. According to the article, “The arrangement means Medicare is essentially forfeiting its buying power, leaving bargaining to doctors’ offices that have little negotiating heft.”
Another piece of the equation is being willing to not cover a drug that doesn’t offer enough of an advantage over an existing, lower-cost drug. For example, England’s National Institute for Health and Care Excellence, or NICE, will conduct analyses and make recommendations to the public health system about whether or not to cover a drug based on its value. If a drug is rejected, its maker will sometimes offer a discount – and then hope to make up the difference in the US?? From the graphs showing cost differences in the report, it sure looks that way. And, by the way, what’s your PBM doing to maximize the value of your drug spend?
There’s a lot of buzz about the health care cost report from the Obama administration just published in Health Affairs. Robert Pear in The New York Times provides a balanced take, but the news is being spun in many different directions. The report estimates that national health spending increased 5.5 percent in 2015, to a total of $3.2 trillion, and will easily surpass $10,000 per person this year. That’s faster than the historically low increases we’ve seen in the recession and years of slow recovery (bad), but still slower than during the two decades prior to the recession (good). One reason for the faster growth is a stronger economy, allowing more people to afford the care they need (good); another is soaring prescription drug costs (bad). The report predicts that health spending will grow an average of 5.7 percent a year from 2017 to 2019 and then 6 percent a year from 2020 to 2025. Our National Survey of Employer-Sponsored Health Plans finds that employers, with a lot of hard work, have been holding average annual increases in health benefit cost per employee to about 4% and expect to do so this year as well. That’s also both good and bad – it’s slower than national spending growth overall, but still faster than inflation and in the long run unsustainable. The most sobering number in the government report? The prediction that by 2025 health care spending will account for 20% of the GDP, a far higher percentage than any other developed country in the world (ugly). Of course, back in 1993, it was predicted we would hit that milestone in 2003 and we didn’t – that’s the good news, if you want to call it that.