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Mercer

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. 

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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.

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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.

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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.

 

April 10

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.

-Karen

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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.

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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.

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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.

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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.

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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.

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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
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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.

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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.

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