Allocating health plan costs in the coming year

As 2018 gets underway, it is important for employers and health plans to consider what healthcare costs could lie ahead in the new year. Keeping the following issues in mind while working toward potential solutions will be helpful in managing costs.

Opioid abuse
According to the U.S. Department of Health and Human Services, the number of opioids prescribed since 1999 has nearly quadrupled and the increase in prescriptions has resulted in an increase in opioid abuse. As a result, health plans are beginning to take steps to curb that abuse. Plans can look to cover or encourage the use of painkillers that are less likely to be abused, such as lower-dose opioids or those that are not easily crushed or otherwise changed. As an example, a number of insurers have indicated that they will no longer cover OxyContin beginning in 2018. In addition, plans may want to consider contracting with substance abuse counselors if their populations have addiction problems or the potential for them. Milliman has analyzed a large commercially insured database and looked at variables such as demographics, mental health, physical health, etc., which can be used for predictive purposes in order to determine how susceptible a population may be to opioid abuse.

Hospital consolidation
In 2016, for the first time ever, less than half of physicians practicing in the United States were independent, according an American Medical Association study. Physicians who work with hospitals are able to charge a facility price at a physician’s office, which has resulted in an increase in hospital costs and significant discrepancies in price for the same services. Therefore, price transparency, coupled with quality information, becomes imperative for the consumer (the employer that provides health benefits and the employees who receive those benefits). There are various vendors who can offer to the consumer the ability to “shop” for surgical procedures and/or physicians based on both price and quality metrics. Additionally, plans can offer narrow network designs, which can incentivize high quality and low price (by “carving out” expensive hospitals that don’t offer higher-quality services).

Uncertainty of the ACA
The Patient Protection and Affordable Care Act (ACA) remains the law of the land, but there continues to be uncertainty around the legislation. The uncertainty is mostly in the individual market, but large losses to insurers and increasing premiums for consumers would have an impact on the group market as well, as healthcare for individuals and groups are intertwined. With signing of the recent tax bill into law, the individual mandate will be repealed in 2018, which will likely result in healthier individuals leaving the market—4 million in 2018 and 13 million by 2027, according to the Congressional Budget Office (CBO)—and premiums increasing for those remaining by an average of more than 10%, according to the CBO. Congress is also continuing to consider ways to repeal the employer mandate, which would have a more direct impact on the group market.

Alternative payment strategies
Plans will also continue the trend of considering alternative payment strategies. The ACA introduced the idea of accountable care organizations (ACOs), which incentivize quality care through shared savings based on trend guarantees. ACOs are usually facilities or professional organizations, but there are also prescription drug shared savings programs that offer trend guarantees, and we expect them to gain some popularity in the coming year. Prescription drug shared savings programs are a unique way to achieve plan savings, in that they align the incentives of the pharmacy benefit manager (PBM) and the plan, as both are focused on controlling costs. In a typical prescription drug contract arrangement, the PBM can offer pricing discount and rebate guarantees without necessarily needing to be concerned with the average wholesale price of the drugs.

The above issues are just a few of what could potentially be on the horizon for 2018 and beyond. We will continue to monitor these issues and others as we begin the new year.

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