As employers look for new ways to offer affordable healthcare benefits to their employees they will have to consider other solutions besides cost-shifting. In this Employee Benefit News article, Milliman’s Dan Bostedt discusses some evolving trends that may shape employer-sponsored healthcare moving forward.
Here is an excerpt:
Rethinking total rewards
Historically, health plans with high benefit levels have been a mainstay of a total rewards package. Going forward, should there be more emphasis on other components, or new components, in the total rewards package? Perhaps it is time to reallocate total rewards spending away from traditional “entitlement” types of benefits. Some goals could be:
Higher percentage of total rewards budget used for performance-based rewards;
Focus on rewards and approaches where costs can be better controlled at the employer level;
Emphasis on rewards that support the current cultural strategy;
More focus on what newer employees value most — tastes and priorities are changing.
As an example, would employees value a performance-based bonus, with lucrative payouts, over the current level of health plan coverage offered? Would that in turn help provide better alignment of total rewards to business goals?….
…The expansion of private exchanges may require further evolution to more component-based rather than package offerings.
Defining the features and capabilities that would add the most value to an organization may require looking at things differently. For example, some employers may not value a private exchange as a whole, but would find value in purchasing just outsourced administration, enrollment, communications, and participant education. Others may want to use an exchange, but would like greater control over the number and types of options and offer them on a self-funded basis. Regional and national options built on narrower networks may also be valued, but perhaps just with respect to network rental versus a private exchange package.
The key is to define the specific components that would most benefit organizational goals and needs and then to press the private exchange marketplace for the flexibility of component offerings.
In the future, more emphasis may be placed on physician-focused consumerism rather than the current focus on employee (participant) consumerism. This is because physicians are often the main decision-makers regarding the use of healthcare services, especially high-cost and/or high-volume services. Physician-focused consumerism will likely develop as a set of initiatives designed to align physician decision-making with high-quality health care outcomes provided in a cost-efficient manner. It can include the redesign of financial incentives for providers, physicians having greater access to broader patient-level data, updated treatment decision support tools, ongoing education about treatment alternatives, and an understanding of the financial impact of alternatives on patients. Physician-focused consumerism can be the basis for collaborative efforts among employer health plan sponsors, provider systems, and physicians. Provider network analysis, especially for narrower networks, may expand to include specific audits of the attributes of the providers in the networks.
Physician-focused consumerism is a set of initiatives designed to align physician decision making with high-quality healthcare outcomes provided in a cost-efficient manner. Physician-focused consumerism can include the redesign of financial incentives, greater access to patient data, decision support tools, ongoing education about treatment alternatives, and an understanding of the financial impact of alternatives on patients. It can be the basis for collaborative efforts between employer health plan sponsors, provider systems, and physicians to help achieve high-quality care in a cost-effective manner.
Milliman is well-suited to support employers’ collaborative efforts with accountable care organizations (ACOs) and to review current provider networks to identify the status of physician-focused consumerism. Dan Bostedt offers some perspective in his article “Health plan consumerism: Who is the consumer?”
Private health exchanges (PHEs) have attracted attention from some large employers sponsoring healthcare benefits. In the latest issue of Benefits Perspective, Milliman’s Troy Filipek, Gregory Herrle, and Paul Houchens discuss three key issues large plan sponsors should evaluate regarding PHEs: risk selection, quality, and cost perspective.
Here is an excerpt considering each issue:
…When considering private exchange options, plan sponsors should evaluate how the private exchanges are balancing greater employee choice with limits on the potential for adverse selection. For example, are employees permitted to change from a lower-cost to higher-cost benefit option in a single year, or is plan selection movement restricted in some manner? Unmanaged risk selection may result in unsustainable employee healthcare cost increases, which may unravel an employer’s defined contribution strategy or result in benefits that are perceived by employees as below average relative to industry norms.
With the introduction of guaranteed issue coverage to the individual market through the Patient Protection and Affordable Care Act (ACA), some employers believe they have a diminished incentive to offer healthcare coverage to employees. However, in addition to avoiding penalties for not offering coverage, employers have strategic reasons to offer healthcare benefits to employees. Specifically, healthy employees generally translate into minimized absenteeism, as well as greater productivity. Health coverage has also been a critical benefit in terms of attracting and retaining the best employees. Therefore, quality healthcare is an important part of the value proposition offered by employers….
Cost considerations relative to self-funded plans
Plan sponsors should also remember some of the advantages available to self-funded plans (whether inside or outside of private exchanges), including, for example:
• Eliminating or substantially limiting insurer profit margins;
• Lowering administrative costs, in general;
• Avoiding state premium taxes and certain ACA provisions, such as the health insurer tax;
• Providing benefit flexibility by avoiding state benefit mandates and allowing for other options better suited to a specific workforce when designing benefit plans; and
• Allowing more control over benefit management.
Large employers interested in offering their employees health plans through PHEs should also consider the questions asked by Dan Bostedt in this paper.
With the financial sustainability challenges introduced by the Patient Protection and Accountable Care Act (ACA), employer health plan sponsors are reevaluating their strategies, with some hoping for a “magic bullet” that will ease financial pressure going forward. Private health exchanges (PHEs) are receiving a lot of attention of late and may provide financial and administrative relief. However, the decision to move to a PHE requires thorough due diligence, analysis, and consideration of potential outcomes.
In this new paper, Milliman’s Dan Bostedt presents several sets of questions that large employers interested in sponsoring health plans through PHEs may want to consider.
Employers face changes to their health plans as the Patient Protection and Affordable Care Act (ACA) comes online. Some employers have already taken time to evaluate the strategic implications of reform on their plan, while others have not. With the delay in the employer mandate announced on July 2, employers now have more time for this kind of strategic planning.
This video outlines the benefits of Milliman’s Healthcare Reform Strategic Impact Study. This study gives an employer a customized view of its health plan and highlights the challenges posed by the ACA–and can thereby empower decisions about plan design, long-term cost control, and the overall direction of the health plan.
Although full implementation of Sections 6055 and 6056 of the ACA will be delayed until 2015, certain immediate actions are still required for 2014. Paul Houchens examines these actions in his new Healthcare Reform Briefing Paper.
The delay in the employer mandate gives employers more time to adapt to the ACA, but the need for vigilant management and long-term term planning remains