There are many cost drivers in health care and insurers and employers are in a fine balancing act of trying to keep a lid on costs and also keeping their employees happy. And while firms are leaving no stone unturned in their quest for reducing costs, some are also adding new services employees are keen on.

Here’s what the report found:

Offering more plans

To combat rising costs, many employers (80%) offer more than one health plan. A growing share of employers offer high-deductible health plans (HDHPs) and health savings accounts (HSAs) to employees. The percentage of companies offering such plans has increased five consecutive years and is now at 56%. At the same time, 24% of employers report more employees choosing HDHPs than the other offered plans.

Employers and employees contribute to the HSAs. When employers contribute, they provide about $500 or more for single coverage and $2,000 or more for family coverage.

Weight-loss drugs

Weight-loss drugs such as Ozempic and Wegovy are growing in popularity. However, these drugs (known as GLP-1s) are expensive, and employers are trying to manage the effects of those costs.

Slightly more than half of employers surveyed include weight management in their benefits programs, but they attach strings to the use of weight-loss medications. This may include:

• Step therapy, which entails trying other, less expensive yet proven pharmaceuticals and health and fitness regimens first.
• Prior authorization before approving their use.
• Eligibility requirements. Around one-fifth of employers set eligibility requirements that include a combination of minimum body mass index and comorbid conditions. They do not pay for the drugs for otherwise healthy employees looking to drop a few pounds.

Plan eligibility and scope

Despite rising costs, some employers are expanding eligibility for and the scope of their health care plans.

The Gallagher report shows a small increase in the share of employers offering coverage to employees’ domestic partners and to part-time employees, though these remain the minority.

Some are also offering more specialty coverages. For example, more than half cover hearing aids and behavior analysis for employees’ children with autism. A small but growing fraction (17%) cover gene therapy.

Almost half of employers cover some form of treatment for infertility, including drugs, specialist evaluations, in vitro fertilization and other fertilization procedures. However, controversies surrounding some of these procedures have led to a patchwork of state mandates and restrictions. This has made providing these benefits more complex for companies.

Mental health and leave

More employers are paying attention to their employees’ mental and emotional states in addition to physical wellness. Most are concerned about staff suffering from burnout and stress.

However, they also believe their managers are not able to recognize the signs. More than a fifth now offer training to managers and human resources staff on identifying warning signs and referring employees for help, and that share has grown in the past two years.

Finally, more firms are offering family-focused leave policies. This recognizes the growing emphasis employees place on work-life balance amid tight labor markets.

Almost 90% offer paid bereavement leave (outside vacation leave,) while almost half provide paid time off to bond with a new child, and 15% provide it for taking care of ill or disabled family members.

The takeaway

Employers are faced with two difficult realities. The workforce is aging, meaning that retirements will shrink the pool of available skilled workers. At the same time, health care costs are ever-increasing.

To meet both these challenges, employers are using the strategies detailed above, as well as other approaches. Some combination of them will help you compete in the war for talent while protecting your bottom line.

Some of the strategies require a proactive approach by engaging with their broker and insurer, and even local health care providers, efforts that may be hampered by location and how flexible insurers may be. The goal for these employers is to reduce their and their employees’ costs and improve health outcomes.

The following are some strategies that employers are pursuing.

Steering workers to certain providers

One way to reduce spending is to contract with insurers that guide patients to facilities and providers that are more affordable and who have good patient outcomes. This process, called steerage, if executed correctly can save the employee money on their deductibles, copays and coinsurance and help them get better overall care.

For standard services, this steerage can help your employees see immediate savings on small payments. But for services that require pre-authorization, such as an MRI or X-ray, the insurer can help steer them to the least expensive provider. The differences in cost for these pre-planned services can often be hundreds of dollars, if not more.

Even guiding workers to outpatient facilities over inpatient facilities for these services can yield even greater savings and a better patient experience.

To get the most benefit out of steerage some employers have been switching from traditional group health insurance to self-insured direct-to-employer health plans. These plans will centralize employees’ health care with an integrated provider network or hospital group that focuses on coordinated care, which can reduce overall costs and improve the quality of care.

Since the employer is self-insured, they can work with a health system to establish an integrated care strategy that puts a premium on steerage.

Getting a handle on drug spending

Pharmacy benefit costs are the fastest-growing part of health care costs, up an estimated 8.4% in 2023, according to the Mercer “National Survey of Employer-Sponsored Health Plans.” And as new and more expensive pharmaceuticals hit the market, the portion of overall health care costs that goes towards medications will continue to rise.

One contributor to the increasing prices that your staff pay for their medication may be the pharmacy benefit manager that your insurer uses. Many PBMs earn commissions on drugs dispensed to patients and they benefit from steering them to higher-cost drugs. As well, many PBMs steer patients to pharmacies that they own, further muddying the waters.

There is a way to cut through this mess, but it requires asking tough questions of your insurer and/or the PBM. Ask them how they earn their money, and what kind of commissions and margins they are earning on drugs dispensed to your employees. It’s best to take this approach with the assistance of us, your broker.

Having an honest discussion with your insurer and PBM can open opportunities to save on pharmaceutical outlays through various strategies, like using generic drugs instead of brand-name ones and ensuring that your workers get the full manufacturer rebates — and that they are not kept by the PBM.

Depending on the PBM, this may or may not work.

Helping your employees get healthier

The healthier your workers are the less they will need to access health care, meaning they will spend less for medical services.

Employers can help their employees by weaving in health and wellness education in their staff communications. As well, many wellness programs focus on improving health, including smoking cessation programs, weight loss programs and free or subsidized gym memberships.

Also, many Americans are not keeping up on preventive care visits, many of which are free under the Affordable Care Act. Keeping up on these visits can help stave off larger health problems in the future.

Sometimes what’s needed for your employees to take preventive care seriously is education. You can work with us to come up with communications strategies aimed at trumpeting the importance of these visits by focusing on improving overall health and cost savings in the long run.

The takeaway

The above strategies follow a trend in health care focusing on improved health outcomes for patients by better coordinating care, particularly for those with chronic conditions. For employers, the name of the game is keeping costs down for themselves and their staff while not sacrificing quality of care and while improving their workers’ health.

Employers have long offered coverage for certain weight loss tools, such as bariatric surgery if employees qualify for the drastic procedure that requires an operation. Other medications that have been on the market for some time have limited effect, don’t work for everyone and can have serious complications.

But a new class of drugs that has hit the market in the last few years has proven extremely effective in helping people lose weight. As a result, pharmaceuticals like Novo Nordisk’s weight-loss-specific Wegovy and Saxenda, and Ozempic — a diabetes medication from the same company — are now in high demand.

There’s one big catch: These drugs are very costly, putting employers in a quandary. They want to attract and retain high-quality talent, but they don’t want to break the bank on their employee benefits offerings.

A recent survey by the Obesity Action Coalition found that 44% of people with obesity would switch jobs if it meant gaining access to obesity treatment coverage. Likewise, 51% would stay in a job they didn’t like to have access to the coverage.

These findings are significant considering how much these drugs cost and the fact that once someone starts taking them, if they stop, they will usually start gaining weight immediately.

What are these drugs?

This class of pharmaceuticals, known as glucagon-like peptide agonists (GLP-1s), have shown to be highly effective in helping people lose excess weight.

Since news spread of how effective they are, demand for these medications has skyrocketed.

Just three years ago, few people had heard of these drugs and they were not often prescribed, but that’s all changed.

For example semaglutide, which is known under the brand names of Ozempic, Wegovy and Rybelsus, was the fourth-most prescribed drug in terms of total costs in 2021 at $10.7 billion, an increase of 90% from the year prior, according to a report in the American Journal of Health-System Pharmacy.

While many of these drugs are injectable, some like Rybelsus come in pill form.

Shocking costs

Experts warn that if more workers seek out these drugs, payer outlays will spike, resulting in higher group health plan premiums for employers.

The list price of Wegovy is $1,350 per package, which breaks down to about $270 per week — or $16,190 per year.

That said, obesity has its own significant costs and proponents of these medications point at the potential for reduced costs on the back end if people lose weight and keep it off.

Medical costs of obesity in the U.S. were $173 billion in 2019, according to the Centers for Disease Control.

An unsustainable trend

It’s estimated that about 60% of large employers’ health plans cover one of these drugs, although with restrictions, including minimum body mass index (BMI) requirements and prior authorization.

Health plans may require enrollees who qualify for obesity care to first use other lower-priced anti-obesity drugs before they move to a GLP.

The American Gastroenterology Association recommends weight loss drugs for anyone who has a BMI over 30, or 27 if they have other medical complications, such as heart disease or diabetes. According to the CDC, 42% of Americans have a BMI over 30, which is considered clinically obese.

As the uptake of these drugs increases, employers and their health plans will need to make painful choices of to what extent the medications should be covered. Insurers are already considering ways to ensure that people who will most benefit from these drugs have access to them.

As impossible as this claim may sound, ask yourself a few questions.

How do current health plans allow members to pay less for services?

Have your employees paid cash for a service or prescription drug (Rx) and found that the cash pay price is lower than using your insurance?

The next question would be, who decides the price of healthcare services today?

Two entities.

These entities have no vested interest in saving anyone any money:

• The health insurance carrier
• The Provider (doctor, hospital, etc.)

Although they would like you to think that the other is the bad guy, the truth is they need each other to co-exist.

What can employers do? Give up? Of course not!

Learn how you can save 30%-60% in health costs with Alternative Reimbursements. It will be the entire theme of the month.

Please keep reading and follow our monthly topic!

In this blog, we will discuss:

• The PPO and its lack of value
• How to change the norms around paying for healthcare services
• 4 forms of Alternative Reimbursements

The BUCAH PPO networks don’t live up to their commitments

Businesses can access a wide-ranging Preferred Provider Organization (PPO) network through the large health insurers. These insurers claim to give members discounts on services from a selected group of doctors and hospitals.

What’s the idea behind this?

• Keeping employees in the health insurance network will maximize savings.
• Safeguard employees from receiving subpar care.
• And reduce the likelihood of disruptions and financial risks.

Isn’t The PPO Discount a Discount?

Health insurance companies claim their Preferred Provider Organization (PPO) networks provide huge discounts for services provided IN NETWORK.  This is one of their main value propositions.  The billed amount used to determine this discount is not fixed and has no real correlation with the actual cost to perform the service. 

Your health insurance company’s discount from these inflated prices can be as much as 500%-1,100%. Most health insurance companies pay between 250% and 500% of the service’s actual cost!

When prices aren’t transparent, it’s difficult, if not impossible, for employees, and their families, to budget accordingly.

Essentially, this PPO discount scheme guarantees that all employers pay an average of double or triple the cash pay price.

How to Use Alternative Reimbursements in Your Health Plan

Employers are afforded more clarity, stability, and predictability in the costs of healthcare services thanks to the alternative reimbursement plans that establish these conditions.

The potential for cost savings for employers is at 30–60%.

But why would providers accept less payment?

Here’s why. The current system pushes employees and their families to thousands of out-of-pocket expenses.

What is the solution? Alternative Reimbursements.

The insurance companies are unnecessary for these reimbursement strategies; therefore, you’re trimming some fat from the system.

We can achieve better pricing and higher quality providers for the everyday employer without a large insurance company involved.

Using more direct and transparent arrangements, a typical employer has a better chance of securing competitive rates and superior service from their providers.

Reimbursement strategies that employ these alternate forms of payment most likely have the plan waives the member portion, resulting in a more expedited and streamlined collection method of payment for the service provided allowing employers to offer a better benefit to their #1 asset.

What are the 4 forms of Alternative Reimbursement?

1. Direct Contracting

Establishing a direct relationship between a company and a healthcare provider(s) of choice is advantageous for everyone involved.

Healthcare providers get compensated more quickly, businesses can significantly reduce their second/third-largest expense, and employees can access more affordable, high-quality care.

Additionally, with direct contracting, employee costs are lowered, even waived, when they access these directly contracted providers. 

2. Bundled Payments

The concept of bundled payments is as simple as it sounds. By using this model, businesses can consolidate all costs related to medical procedures like surgeries and other forms of specialized treatment into a single payment.

Everyday care episodes included in bundled payments range from orthopedic procedures to general surgeries like gallbladder removals and appendicitis. 

Physicians, hospitals, anesthesia, and, even implants and physical therapy all receive aligned payments to encourage them to collaborate on providing exceptional care to employees.

3. Reference-Based Pricing

A reference-based reimbursement system establishes a concrete and transparent pricing model between businesses and healthcare providers. With RBP, an employer is using Medicare to establish the basis of how its health plan will reimburse for services.  Typically paying a 50% net profit above cost, properly constructed RBP plans create a mutually acceptable transaction between the employer’s plan and the healthcare provider.  

Reference-based pricing is how companies seek to get away from the confusing bill-charge discounts that conventional health plans offer.

4. Cash

When an employee receives medical care, the doctor’s office or clinic initiates a lengthy billing process that involves everyone from the clinic to the employee’s insurance company and back again.

Deductibles, co-payments, and co-insurance get calculated as part of the process. This procedure takes several months and significantly contributes to rising healthcare costs.

If you need urgent medical attention, you can pay for it in cash on the spot, just like you would for a candy bar at the gas station. Why can’t this be used for everyday planned care?  Well, it can… think of paying cash using Venmo, only this is used to pay for services provided to a member of an employer’s health plan. 

Because there is no need for lengthy paperwork or third-party adjustment when a patient pays in cash, many hospitals, practices, and doctors are willing to accept a reduced fee.

Conclusion

The claim that you can’t pay less for healthcare unless you pay less for healthcare may seem a bit whimsical at first glance. If businesses stick to the same model, they can’t hope to bring down healthcare costs.

Healthcare providers and insurance companies are not motivated to help patients cut costs. What business would want to reduce their revenue?

Due to the opaque nature of their pricing structure, they often hit employees with outlandish fees. It’s so bad that paying in cash is cheaper than using insurance. How unbelievable is that!

How can we fix it? Adopting an Alternative Reimbursement model is the key to lowering healthcare costs while still providing quality care to employees.

Employers curtail cost-shifting

• Employers on average are paying out $10,500 for their portion of the premium, up 3.7% from $10,123 in 2021.
• Employees’ share of the premium increased only 0.6% during that same time to $2,520.

• As mentioned above, employees’ share of premium increased 0.6% to $2,520.
• Average employee out-of-pocket costs (deductibles, copays and coinsurance) jumped to $1,892 in 2022, up 5.1%.

Looking ahead

One in five workers surveyed said that health care and health insurance are a major factor when deciding to accept a job, compared with only 13% of human resources executives, according to the “2022 Health at Work” survey by Quest Diagnostics.

And when asked to cite the top two factors for attracting and retaining workers, 50% of employees cited comprehensive health insurance, making it the highest-rated factor. That’s compared with only 37% of HR executives.

While making more money was still the top reason for looking for new work, the results illustrate the importance of health benefits and that employers are not as tuned into their employees’ needs as they think they are.

But the one issue hanging over all employee benefits, particularly health insurance, is the costs. Employees are now expecting employers to do more to control these costs, particularly as premiums are expected to increase as more people are dealing with chronic conditions and delayed treatment due to the COVID-19 pandemic. That should be a wake-up call for employers.

Here are some of the approaches that employers are taking:

Pay a fixed amount to an employee’s total premium — In this scenario you agree to pay a set amount towards the premium regardless of which plan your worker chooses. If they choose one with more generous benefits and lower out-of-pocket costs, they’ll pay more out of pocket than if they choose a plan with a lower premium. You can choose either a flat rate or a specific percentage of total premium.

Offer narrow network health plans — Employees who sign up for these plans can only receive care and services from providers in the plan’s network. If they go out of network, it will likely not be covered and the employee has to pay for the costs out of pocket.

And because the network is narrow, meaning the insurer doesn’t contract with a number of different providers, premiums are usually lower, but still offer quality care.

Offer wellness programs — If implemented properly, these programs can help your workers improve their overall health through lifestyle change. There are a number of wellness programs with a focus on a variety of areas, such as smoking cessation, weight loss, exercise programs and activities, and health screenings.

These are all programs aimed at preventing disease and poor health, reducing the need for expensive medical care later.

Offer a telemedicine option — Virtual care services have exploded during the last two years and more plans are covering these services.

Offering telemedicine as part of your benefits package can lead to substantial cost savings as it allows your employees to access health care professionals when they need them, 24/7. This can reduce the chances of trips to urgent care facilities and emergency rooms, which are both costly.

Offer HDHPs — High-deductible health plans tend to be less expensive than other plans because they shift more of the cost to the employee, who pays out of pocket in exchange for lower premiums.

Typically, employers will arrange for workers to contribute a portion of their pay, pre-tax, into a health savings account, which they can later use to pay for health services and medicine. The idea is that your employees will use the money they save on premiums and deposit it into the HSAs, which have a number of benefits:

• Funds going into the accounts are not taxed,
• Withdrawals are not taxed,
• HSAs have an investment feature that lets account holders invest their funds, much like a 401(k) plan, and
• Employees can keep the accounts, and even move them between employers.

Don’t skimp on explaining

Make benefits communications all year long

Know your crew

• Their age.
• Whether or not they are married.
• Whether or not they have children.
• Their health situation.

The takeaway

• Health savings accounts
• Health reimbursement arrangements, and
• Flexible spending accounts.

• Masks,
• Sanitary wipes, and
• Hand sanitizers.

What to do

• The employee’s W-2 wages, as reported in Box 1 (at the start of 2022).
• The employee’s rate of pay, which is the hourly wage rate multiplied by 130 hours per month (at the start of 2022).
• The individual federal poverty level, which is published by the Department of Health and Human Services in January of every year. If using this method, an employee’s premium contribution cannot be more than $104.52 per month.

Out-of-pocket maximums

• Self-only plans — $8,700, up from $8,550 in 2021.
• Family plans — $17,400, up from $17,100 in 2021.
• Self-only health savings account-qualified high-deductible health plans — $7,050, up from $7,000 in 2021.
• Family HSA-qualified HDHPs — $14,100, up from $14,000 in 2021.

The Pharmaceutical Care Management Association, a trade association for PBMs, has sued the Department of Health and Human Services, Internal Revenue Service and Department of Labor, all of which were instrumental in rolling out transparency regulations in 2020, which took effect Jan. 1, 2021.

The rules specifically require health plans (including PBMs) and health insurers to disclose on their websites their in-network negotiated rates, billed charges and allowed amounts paid for out-of-network providers, and the negotiated rate and historical net price for prescription drugs.

PBMs were included in the transparency rules because numerous reports have found that some of them rely on opaque contracts with pharmacies and drug companies, and that they allegedly fail to pass on rebates and lower drug prices they negotiate to their enrollees.

The lawsuit comes as PBMs are feeling the heat over their practices. At least seven states and the District of Columbia are investigating them, mainly focusing on whether they fully disclose the details of their business and whether they receive overpayments under state contracts.

Also, attorneys general in four states have sued PBMs, mostly alleging that they misled state-run Medicare programs about pharmacy-related costs.

What the PBMs are saying

The PBMs allege in their lawsuit that the rule will not benefit consumers because their knowing what the contracted drug prices are won’t have an effect on them as there are no actions they can take knowing this information.

The trade association said: “The rule offers consumers no actionable information because net prescription drug prices are not charged to consumers and never appear on a bill.” Instead, the information will likely confuse consumers, it alleges.

The trade body in its court filing said PBMs maintain that their business model hinges on their ability to negotiate confidentially and keep the details of their manufacturer contracts as trade secrets that are not available to other drug manufacturers or otherwise disclosed to the public.

“Confidentiality, in turn, allows PBMs to bargain from a position of strength to reduce drug prices,” it wrote. “Government-enforced information sharing will raise costs by reducing PBMs’ ability to negotiate deeper discounts on drug prices.

“The regulation threatens to drive up the total drug price ultimately borne by health plans, taxpayers and consumers by advantaging drug manufacturers in negotiations over price concessions,” it added.