How Employers Are Adapting to the New Landscape in Healthcare

Caroline Helwick

July 2013, Vol 4, No 6 - AVBCC 2013 3rd Annual Conference

Hollywood, FL—With the new landscape of healthcare delivery yet to come into sharp focus, employers are living in “the land of confusion,” wondering how they will conform to new requirements, meet the expectations of their employees, and remain profitable, said Peter Hayes, Principal, Healthcare Solutions, Duluth, GA, at the Third Annual Conference of the Association for Value-Based Cancer Care.

The “Value Disconnect”
Healthcare Resources Are Finite
“Obamacare is going to fundamentally change how we pay for healthcare, who pays for healthcare, and who will be making the decisions around the healthcare we deliver,” Mr Hayes said.“

Employers are faced with deciding whether to continue to offer health benefits or not, and we have been underestimating what that is going to mean.”

Employers will face increasingly burdensome cost pressures, because the average premium is expected to increase by 30%. Employees, by contrast, are underestimating their health insurance benefits: although employers spend an average of $20,000 on an employee’s premium, the employee perceives that it is only half this amount, hence the “value disconnect” between employers and their employees in their approach to health benefits.

Employers are recognizing that conventional health benefit strategies are not working, and they are increasingly deferring the decision-making process to consultants, attorneys, and others, and are “rethinking what they are doing.” Employers are also recognizing that healthcare resources are finite, that there are wide variations in cost and quality, and that they should help address this problem.

Employers are concerned about the uncertainty of the regulatory environment and the economy, which contributes to the need to “rethink” their strategies. In response, some will move from having full-time employees with benefits to part-time employees without benefits, according to Mr Hayes, who called these “the significant issues shaping the marketplace.”

In Search of the Right Care at the Right Place
From an employer’s perspective, “value” can be summed up as high- quality, safe, cost-effective care de­livered at the right place and at the right price, Mr Hayes said.

The problem is that this is rarely realized in actual practice. The “right care” is limited to only approximately 50% of encounters. The “right place” is also not ensured, as evidenced by the fact that only a small percentage of hospitals have received the rating of “clinical excellence.”
“If Medicare patients got their care at those hospitals, 164,000 lives would be saved, and that’s 34% lower mortality. Where you get care makes a difference,” he pointed out.

The “right price” is an interesting concept, Mr Hayes continued. Employers in focus groups are hard to engage around “price,” but they will have conversations around “quality and outcomes,” he said. And those are often not encouraging.

Table: The US Healthcare Landscape in 5 Years.
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The Future of Health Insurance
Employers choose to adapt in various ways to the changes in the healthcare landscape, to some extent depending on their size and position. Anticipated changes in healthcare in the next 5 years will likely result in major changes in employer-based health insurance, including many employers not offering insurance (Table).

“There’s a saying that if you’ve talked to one employer, you’ve talked to one employer. There will be big differ­ences in reactions and strategies between small employers, mid-sized employers, and large employers,” Mr Hayes predicted.

Some specialists estimate that most of the small- or mid-sized employers will discontinue healthcare benefits and will refer their employees elsewhere, such as to the health exchanges. The fact that 70% of Americans are employed by small or mid-sized companies makes this a problem.

Employers’ insurance strategies will also depend on the region of the country and the type of industry. For example, the energy sector is interested in retaining key personnel, and cost is less important to them than to the retail sector, in which margins are small and the cost of premiums is important. Industry leaders will largely determine this trend. “If Walmart continues to provide benefits, other retailers will do likewise,” Mr Hayes suggested.

This issue will trigger workforce issues, because many individuals may be shifted to part-time status, he added.

Hot Trends in Healthcare
Employers will also be expected to keep up with “hot trends” in healthcare, such as incentivized wellness, aggressive steerage to providers of excellence, consumer-driven health plans, the use of health advocates, retail and on-site clinics, telemedicine, and smart device apps.

“We are seeing that employers have become interested in sending their employees to the top quartile of providers, who are offering high-quality, cost-effective care, and creating the right incentives to move volume,” Mr Hayes said.

“And the phenomenon of retail clinics is amazing. One of every 4 Americans went to a retail clinic last year for healthcare. The Walgreens and Walmarts are thinking about creating total integrated health delivery systems. The world is really changing,” he added.

Payment reform is of great interest to employers, who are considering outsourcing the decision-making about benefits to private exchanges. Employers are demanding more quality and more price transparency. “Employers are going to stop paying for every widget of service. It’s no longer going to be a complete pass through,” he predicted.

They will be steering patients to Centers of Excellence and demanding second opinions. They will expect that clinical outcomes relate to the cost of treatment (which is occurring in Europe), and they will be exploring global and episode-based pricing.

The “global marketplace” could become a key player in large plans, Mr Hayes said, and he gave an example from his own experience. “We were paying up to $100,000 for hip replacements. We looked outside the United States and found we could partner with Singapore for a $10,000 hip replacement. The global marketplace will become applicable to cancer care too.”