The 2015 Kaiser Employer Health Benefits Survey found that a majority of employers said controlling the rising cost of healthcare and other employee benefits is one of their most important concerns. Medical trend has consistently outpaced inflation, which is expected to result in an unsustainable situation that will require across-the-board changes in the industry. The implementation of the excise tax on high-cost health plans, effective for plan years after 2017, has created even more incentive for managing costs, because any healthcare costs above the excise tax thresholds will be taxed at 40%. In the past, one of the ways an employer could control costs was by increasing member cost-sharing through deductibles, copayments, and coinsurance. However, because an employer needs to maintain at least minimum value (60% actuarial value, approximately equivalent to a bronze plan) in order to avoid paying penalties, increasing member cost-sharing is, at best, a temporary solution, as the excise tax thresholds only increase by inflation. Additionally, for a typical gold plan (approximately 80% actuarial value), the impact of the excise tax will be felt even sooner. As a result, managing healthcare costs beyond cost-shifting will become the main focus of employer-sponsored insurance.
Given the greater emphasis on improving the quality of care in employer-sponsored insurance, employers and their consultants need to work together to implement cost containment programs into their medical and prescription drug plans. A cost containment program can be defined as any action by the plan, excluding increasing broad-based member cost-sharing that results in savings on total plan costs. Cost containment programs encourage the utilization of necessary services and avoidance of unnecessary services, and generally fall into one of the following categories:
• Prescription drug management
• Medical management
• Provider programs
Employers can utilize these programs in order to attempt to control plan costs and provide members with the most cost-efficient services that promote wellness and the improvement of overall health.
Prescription drugs seem to have the most opportunity for cost control. Through the use of pharmacy benefit managers (PBMs), members can be steered toward using drugs that are both low-cost (e.g., generics) and most effective (by ensuring the drug works best for the patient). Examples of prescription drug cost containment programs that lower plan costs include adding certain bioequivalent drugs that provide better discounts and/or rebates to preferred drug lists (PDLs), excluding certain prescription drugs from the plan altogether (e.g., over-the-counter drugs, drugs used for cosmetic purposes, or experimental drugs), and implementing a mandatory generics rule that requires patients to first try generics over brand drugs when generics are available. Examples of programs that encourage patients to take the most effective drugs available include prior authorization, step therapy, and dose optimization.
Cost containment programs can also be implemented in the medical plan. Savings can be realized through medical management—condition management, demand management, and case management. One of the plan’s main purposes is to provide the necessary services and ensure that its members receive the proper treatment. One of the provisions of the Patient Protection and Affordable Care Act (ACA) was to cover preventive services at 100%. If members are able to receive preventive services at no cost, they are more likely to utilize them. It is in the plan’s best interest to provide promotional communications that encourage members to use preventive services. The use of preventive services can potentially prevent higher-cost claims in the future. Additionally, for plans with members utilizing the wrong services (i.e., using the emergency room instead of the doctor’s office or an urgent care center), the plan can promote the proper site of care through communication and plan design (such as having a larger differential between copayments). Additionally, members can be directed to use the right services through coaching via a telephonic nurse counseling program.
Finally, plans may save money without disadvantaging the members by engaging providers in alternative provider reimbursement arrangements, such as accountable care organizations (ACOs), bundled payments, and pay-for-performance arrangements. ACOs are groups of doctors, hospitals, or other healthcare providers who come together to attempt to give coordinated high-quality care to their patients, ensuring that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. ACOs are usually eligible to participate in shared savings and losses, which encourages ACOs to focus on quality. Bundled payments aim to eliminate unnecessary additional payments for certain groups of common procedures by offering one payment for all of the procedures based on expected costs rather than separate payments to each portion of the procedures. Pay-for-performance arrangements incentivize physicians and providers by rewarding those that exhibit effective outcomes.
Cost containment programs may result in a win-win situation for employers and employees. Employers benefit by saving money on the benefits provided to employees and their dependents. Employees and their dependents benefit by utilizing the correct services, receiving increased quality of services, and, in some cases, sharing in the savings achieved by the plan.