The Argument

Employers are Key to Reform in Our New Health Care World

Given that employers are footing a big share of the health care bill, they have the opportunity to shape how the system evolves.

Health care reform remains on again, off again, on again … who knows.

There is a lot of prognostication going on about what health care coverage will look like during and after the Trump administration. In the meantime, our inefficient and expensive health care system plods along into the future. With chaos in Washington, who will be leading the charge? Turns out it is businesses — and other large-scale purchasers of health care who have keen incentives to transform the system.

health care education, health literacy, stethoscope and book

Employers can play a big role in influencing the future of health care.

We aren’t getting good value for our health care spending. You’ve probably heard it said that we spend more on health care per person in the U.S. than any other developed nation, yet we have worse outcomes. How can this be when we have such shining examples of excellence? The problem is the quality of care varies tremendously from health care provider to provider — even in different departments of the same institutions. And more expensive care does not necessarily mean better care. The price tag is more of a reflection of the negotiating strength of the provider than its quality of care.

We also foot the bill for all kinds of unnecessary care. Across the United States today, we pay for medically unnecessary early elective deliveries of babies (before 39 weeks of gestation). Not only are these births more expensive but they can lead to worse outcomes for mothers and babies. Some health care purchasers have established policies under which they refuse to pay for them and, guess what, the numbers of these births plummet.

Similarly, there is still far too much dependence on the emergency department as the entry into the health care system. It is also one of the most expensive settings in which to deliver health care. Yet, it is a default location for after-hours care.

The fact is that employers end up paying for these inappropriate medical interventions, as do others, in the premiums they pay. And it’s costly. In 2016, employees paid an average of $5,277 in premiums for their family, while the employer share was an average of $12,865.

Employers Can Help Shape How the System Evolves

Given that employers are footing a big share of the bill for health care, they have the opportunity to shape how the health care system evolves. As of 2015, employer-sponsored insurance covered nearly 56 percent of the population, or 147 million people.

While the Affordable Care Act added some 20 million Americans to the rolls of the insured, employers will continue to cover more Americans no matter what happens in Washington over the next few years. In covering more people than Medicare and Medicaid combined, employers have a lot at stake and a lot of influence when it comes to reforming the functioning of our health care system. Wanting something better for every health care dollar they spend means they need to push for greater focus on quality, efficiency, and costs.

Employers and other health care purchasers — as large and influential customers of the health care system – have some say in how we pay health care providers. They can influence how the health insurance plans contract with health care providers, pushing them to create more value-oriented arrangements where quality and efficiency play into how much the provider gets paid.

The question we all face is what are the most powerful incentives for providers? Is it enough to change how we pay them? Is it giving incentives through benefit design to their patients to be more selective about their care providers? Both?

There are also some employer-led experiments across the country. Boeing Co. is contracting directly with health systems in several states to provide care for some of their employees, retirees, and their families. These health plan participants have lower costs when they seek care from these providers; these providers also stand to gain if they reduce spending by better coordinating care and addressing the holistic needs of the sickest.

Wal-Mart Stores Inc. is contracting directly with health care providers for specific high-cost, high-risk procedures and paying them an upfront package price for the care they deliver. Concurrently, Walmart associates have lower cost sharing if they seek these services from these providers. Without any new laws, employers can seek ways like these to lower costs and retain or improve quality.

Push for Data Driven Decisions

But making good decisions requires having good information. In that department, health care is far behind other industries. When it’s an employer trying to determine which provider in a given market offers the highest value, a patient trying to select a provider, or a primary care physician trying to make an affordable referral to a specialist for her patient, we’re all operating too much in the dark.

At the turn of the millennium, there was no transparency about the quality and prices associated with different health care providers — we’ve made big strides since then. But large scale purchasers have too much at stake to work blindfolded. They must examine the data they have to understand their population’s health care needs, utilization, and where pushing further can close gaps in care and stave off potentially avoidable and expensive complications. And they need to keep insisting that their employees and their families — and the providers who care for them — have enough information to make smart health care choices.

It’s Time for Experimentation and Evaluation

To make decisions that increase value, employers and all other health care purchasers need to know what transforms health care in the right direction. Lots of experiments are trying to find magic formulas that reduce the costs of health care while preserving or improving the quality of the care. They are pushing for greater transparency, changes to how we pay health care providers, experimenting with new incentives for their employees and being more selective about which providers they point their population to.

The federal government has also been working to figure it out (full disclosure: I have been consulting on this effort). My organization, Catalyst for Payment Reform, is also working toward a multistate investigation of how sweeping changes to paying health care providers correlate with changes in how the health care system performs. The only thing that’s for sure is that there is not a one-size-fits-all solution; it’s going to take a lot of creativity in many directions to get to better value.

Many employers contract with insurance companies to take on the risk of covering their employees’ health care needs. But a significant group of employers — covering 63 percent of workers with employer-sponsored insurance — choose to take on the risk of coverage for their employees because they are big enough to spread the insurance risk across a sizable population and want to know where their health care dollars are going.

They contract with insurance companies to manage their benefits, and thus have a significant say in what the insurance company does. However, in my experience, many corporate leaders fall short of wielding the influence they have as customers to the advantage of their company or its employees. Being a proactive manager of this relationship will have dividends — a healthier population means a more productive one.

Start at Home

Employees are a key asset in many ways, of course, but also when it comes to shaping the future health care system. In recent times, employees have felt increasing cost pressure when they seek (or avoid) health care. Unions and other employee representatives know well that wage increases have stalled because much of the money that would otherwise raise their wages is sucked into the health care budget. The issue of medical debt is also on the mind of many Americans fearful of what the future will bring. With good and clear communications, strong choices and the right incentives, employees can be an important part of a movement to improve the delivery and affordability of health care. Telehealth, worksite-clinics, transparency in pricing and quality are all examples of reforms that employees who have access to them are increasingly using for their cost and convenience.

The bottom line: So much can still be done to reform health care, even when the future is uncertain.

Suzanne Delbanco is executive director of Catalyst for Payment Reform in Berkeley, California, an independent, nonprofit corporation. She is a nine-time selectee as one of the 100 most influential people in health care by Modern Healthcare magazine.