General Motors on Monday inked a deal with Detroit-based hospital system Henry Ford Health System to provide a new direct-to-employer healthcare option to 24,000 of its salaried employees and their dependents in Southeast Michigan.

The agreement — which will require GM employees who choose the Henry Ford plan to get all of their healthcare and wellness services, including surgeries, through the Henry Ford Health System or face expensive out-of-network rates — is a strategy model being embraced by employers as they try to reduce employee healthcare costs and improve care by bypassing traditional insurers.

Though the strategy is not widely used — just 3% of self-insured companies nationally have some form of direct contracts with providers, according to the National Business Group on Health — it’s gaining momentum as companies including Walmart, Intel and Boeing partner directly with providers.

Photo credit: Bloomberg News

“If you talk to a lot of brokers and consultants around the country, they’ve been pushing for this idea of direct contracting as a way to save money and narrow not only the healthcare spend, but their exposure to various levels of quality and cost variation,” says Bret Jackson, president of The Economic Alliance for Michigan, a member of the National Alliance of Healthcare Purchaser Coalitions. “I think this is a move that we knew was coming. But [GM’s move] to contract where their headquarters are, and being in a market where there is a lot of hospital competition, sends a strong signal of what the future means for employee benefits.”

General Motors’ new plan, called GM ConnectedCare, will be added as a new option for the company’s salaried employees this fall, with service beginning Jan. 1. The plan will provide employees access to more than 3,000 providers from an expansive network of primary care and specialty care doctors.

Blue Cross Blue Shield of Michigan will manage claims-processing and other functions.

The automaker still will offer PPO plans to employees, but the company expects that employees who choose the ConnectedCare can save anywhere from $300 to $900 a month.

The partnership “comes from our ongoing quest to improve employee health, while also seeking to offset rising healthcare costs for both the employee and the company,” says Sheila Savageau, GM’s U.S. healthcare leader.

Though the cost and quality benefits of such arrangements may sound tempting to employers, the contracts are typically complicated to administer and generally work only if an employer has a sizable employee base in one region, experts warn.

“It takes a lot in order to pull this type of agreement off,” Jackson says. “There has to be constant communication in terms of employee benefit owners, and you have to keep track of a lot of moving parts.”

Employers who enter into a direct contract with a healthcare provider need expertise and bandwidth, “a luxury that not many have,” adds Suzanne Delbanco, executive director of the Catalyst for Payment Reform, an employer-led health care think tank and advocacy group.

That’s why Jackson says that while he expects other large employers to jump on the trend in the coming years, he doesn’t expect a widespread movement because “most employers aren’t in the right situation.”

But for employers that are capable, Delbanco says, “it can be a powerful way to forge a strong relationship with an important source of healthcare for their employees built on the employer’s expectations around quality, cost and patient experience.”

In GM’s case, the company hopes the partnership will improve employee wellness and take aim at employees’ chronic conditions. Henry Ford will help ConnectedCare patients keep track of their health with regular wellness exams, monitoring of chronic conditions and preventive screenings for diseases like colon cancer, breast cancer and depression. GM hopes the health system also will help employees choose the right care options, such as walk-in clinics rather than emergency rooms for minor illness and injury.

“These tools, along with the collaborative network of physicians that we’ve assembled, have enabled us to make an immediate and positive impact on our patients,” says Bruce Muma, chief medical officer and interim president and CEO, Henry Ford Physician Network.

When employers contract with providers directly, it can have a ripple effect on other employers — even those who aren’t in a position to partner like this, Jackson says.

“I think it’s beneficial not just for the GMs of the world, but for small or medium-sized companies that don’t have the leverage that a General Motors does in this marketplace,” he says. Other health systems will have to link up quickly and adapt to changing expectations, he says, “patients getting same-day or next-day appointments, or being able to see a specialist in 10 days, and having cost-effective options in order to meet the demands of the new consumer.”

In general, there has been a big growth in large employers taking healthcare into their own hands as a way to take more control over a health system they see as wasteful and inefficient. In addition to direct contracts for employee coverage — a la Walmart, which has partnered with Mayo Clinic and Geisinger to care for certain conditions under a “centers for excellence” model, and companies including Intel and Boeing, which have direct employer contracts with health systems — a number of other employers have announced big benefits initiatives in the past year.

Amazon, JP Morgan and Berkshire Hathaway are in the midst of launching an independent healthcare company for their U.S. employees. Apple said it intends to set up a network of health clinics for employees and their families at the tech company’s headquarters.

“Employers taking healthcare into their own hands is the most meaningful way we can change healthcare in this country,” Jackson says.

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