Commentary: For many benefits professionals, the different private exchange offerings and the varied value propositions they present can be overwhelming. So lets take a step back and examine the issues one at a time.
No doubt that most employers are considering exchanges as a means to steer clear of the Cadillac/excise tax threshold. And with the benefits department traditionally viewed as a cost center, pressures from the CFO to contain near-term organizational expenses havent been more evident. While important, the key is how to most effectively achieve effective cost management. A number of tactics exist:
Near-term cost impact
1. Cost-shifting to benefits enrollees. Generally, employers have achieved this objective via reducing the actuarial value of health plans, so that the enrollee share of costs increases from year to year.
2. Network discounts. Whether through competition in a multi-network private exchange, a single plan volume-driven discount, narrow (low cost) networks, or the result of a quilted network of greatest discounts in geographic regions, cost savings appears to be a common attribute of most exchange offerings.
3. Right-sizing of benefits purchasing. Many employers entering private exchanges are optimistically anticipating that benefits enrollees will buy down to lower cost health plans, in an effort to increase their take-home pay. For a number of these individuals, this may make sound economic sense. However, for others, particularly those who are paid at or near minimum wage, the choice of health plan purchasing isnt that simple. More immediate priorities, including essential food and shelter needs, may prompt these individuals to buy a low-cost plan, with the hope that they wont get sick because they wont be able to afford their high deductible. (Its sobering to know that medical bankruptcy is the most common cause of personal bankruptcy and half of those individuals have health insurance.)
4. Other reasons. HR tactics, including shifting of employees to part-time status, or other workforce management approaches to benefits cost containment are out of scope of the current discussion. Reductions in the HR workforce due to benefits outsourcing do provide tangible savings, but, like employee purchasing of less expensive health care plans, represent a one-time savings.
The implications of these near-term cost savings can be profound, and should definitely be a topic for greater focus and understanding by employers. Specifically, if an employer realizes near-term cost savings as a function of cost shifting to employees (perhaps via buy-down to less expensive health plans), what happens to the use of appropriate care particularly for those with chronic conditions? Evidence indicates that these individuals are avoiding use of both appropriate and inappropriate care, so while near-term health care costs may decrease, these individuals may well be at increased risk for disease-specific complications due to a lack of effective care management.
But thats not all. Individuals with poorly managed chronic conditions are more likely to have illness-related absence, perform less effectively while at work, and have a greater risk of work-related injury. Additionally, only 29% of employees feel their employer is supporting their health, according to a recent survey, which may contribute to low engagement levels and job turnover. These associated costs are not typically considered as part of benefits expenditures, and consequently, may well result in an overestimate of employer cost savings.
Longer-term cost impact
For some odd reason, the potential for longer term cost savings doesnt seem to be as important a focus for most employers. It is understandable that near-term cost savings represent an immediate priority for the C-suite. Yet a meaningful reduction in health care cost trend as a result of effective population health management could well yield substantial value, potentially eclipsing that of any near-term cost savings, and be accumulative over time. Instead, many employers are focused on the buying experience, near-term cost savings, and network disruption concerns, giving substantially less attention to health management capabilities and outcomes.
How can employers ensure that meaningful population health management is an important focus? Marketing announcements of health care cost reductions may occur as a consequence of administrative functions network discounts or lower cost benefit design purchasing instead of savings from effective chronic condition/population health management.
The truth is that its a bit early to see cost savings from improved health management, which may take a few years to become evident. That said, what we do know is that there are clear early measures that can be used as predictors for future health care cost savings. If the trend for these early indicators including medication adherence, gaps in care for chronic conditions, and ongoing participation in health management programs are favorable, then its likely that future health care cost trend can be anticipated to decline.
Enablers for effective population health management
Contributing to enhanced benefits enrollee health and well-being, three areas merit further discussion: well-being and health care consumerism and the data analytics to collectively inform employer and private exchange strategies and tactics.
1. Transition from wellness to well-being. Does wellness work? There is growing recognition that programs focused strictly on physical wellness and traditional health risks (weight, activity, nutrition and smoking) may not yield the desired magnitude of savings to employers as once thought. One consideration is that this long-standing approach is inappropriately narrow in focus, and incorporation of a broader, more holistic view of individuals and the quality of their lives so-called well-being may have more meaningful and lasting impact, with favorable influence on individuals at work and at home.
Some exchange offerings directly address this issue with an incentive-based well-being program that includes dimensions of financial, behavioral, social and career well-being. With a recent consumer stress survey indicating that financial stress, workplace issues and personal relationships take priority over personal health concerns, the value of adopting a well-being approach to address personal priorities (symptoms) can easily be appreciated. Perhaps by so doing, personal priorities can be addressed, and we can perhaps then reasonably expect an individuals focus on personal health to increase.
2. Enhanced health care consumerism. If private exchanges provide consumerism tools, will people use them? The answer isnt at all clear. Just because employers have cost and quality transparency tools doesnt mean that the issue of consumer value-based purchasing has been solved.
People are at different stages on their health care consumerism journey, and will benefit from receiving information that is relevant to their level of understanding. While a one-size-fits-all offering may provide some benefit, an approach that targets messaging to meet people where they are can be expected to yield enhanced value.
Perhaps more importantly, decision support tools should be an integral part of any health care consumerism initiative. Cost and quality information can be helpful but only after individuals determine which treatment approach best meets their needs. For example, it may be easy to find a quality surgeon to perform spinal fusion surgery but what if its not necessary? Effective decision support tools can certainly promote the use of evidence-based care and then guide appropriate use of cost/quality transparency tools.
3. Actionable analytics. Meaningful data management is foundational for an effective exchange offering. At the patient level, data from one vendor can be used to inform the care delivery of another, improving efficiency and the likelihood of favorable outcomes. For example, if an individual with diabetes has a hemoglobin A1c test performed as part of biometric screening, that result should be made available to the primary care practitioner as well as potentially the chronic condition management vendor, to ensure appropriate therapeutic changes to optimize diabetes control.
At a population level, the aggregate data can be used to identify groups of individuals at risk for disease-specific complications, in order to target them for directed outreach. Additionally, the data can be used to support employer health, well-being, job performance and engagement initiatives that may be outside the scope of the private exchange offering. Lastly, for exchange operators, the data can be used to assess vendor performance to ensure that desired goals are being achieved.
From a practical perspective, the following list of questions represent broad areas of understanding for employers that should be included as part of the private exchange vendor evaluation process. Employers with a clear understanding of the responses to these questions will be in a better position to make a more informed decision about their selection of a preferred private exchange vendor partner.
- Does your private exchange have the ability to integrate data from multiple health plans and vendors to support the health management strategies and tactics of those entities?
- How is your private exchange addressing and/or supporting individual and population well-being?
- How does your exchange offering support health care consumerism beyond cost and quality transparency tools?
- How has your exchange offering impacted population health, in terms of preventive care compliance, chronic condition gaps in care, clinical outcomes, as well as avoidable hospitalizations?
- In addition to the near-term savings from buying down of health plans and network discounts, what population health management utilization and cost outcomes have you been able to achieve?
- What is different about the private exchange that makes the cost trend bending more likely relative to current health plan design and care delivery?
There is substantial variation in the value proposition of the current private exchange vendors. As part of their due diligence, employers need to evaluate each exchange in the context of the employee experience with benefit plan selection as well as associated administrative capabilities.
Also see: Top 10 employee questions about private exchange enrollment
In addition, employers should ensure that they have a clear understanding of the potential impact of each exchange offering on population health and the exchanges ability to favorably impact workforce well-being as well as future health care costs. Being penny-wise and pound foolish by focusing on near-term savings without regard to population health and well-being management capabilities can ultimately shift employers from favorable initial outcomes to a health care cost and workforce illness-related absence and lost productivity disaster.
And that would be a real nightmare.
Bruce Sherman, MD, FCCP, FACOEM, serves as the medical director, population health management for the RightOpt private exchange offering for Buck Consultants at Xerox. He will be participating in a panel discussion about tools for plan selection and plan management on private exchanges during EBNs Private Healthcare Exchanges conference July 23-24 in Chicago.
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