Strategic Insights on Midsize Employers and Cancer Care Coverage
It is no surprise that healthcare costs are at an all-time high and continue to take center stage in political, social, and economic debates. Employers, as health plan sponsors and as purchasers of care, are looking to take matters into their own hands and tackle the problem through innovative reimbursement strategies. Not all employers, however, are built the same. Experiences in controlling healthcare costs vary between small and large employers. The most affected employers are in the middle and are known as midsize employers.
Although the federal government does not specifically recognize midsize employers,1 The Ohio State University’s National Center for the Middle Market defines midsize employer as a firm with revenues between $10 million and $1 billion annually.2 Even though these companies employ between 500 and 2500 employees, this middle market is estimated to be 200,000 businesses, representing one-third of the US private sector GDP (gross domestic product), employing approximately 44.5 million people.2 This group of employers is more sensitive to cost-driving factors such as healthcare, and they frequently lack the resources required to make informed decisions and execute a complex cost-savings design.
Employers Managing Risk
The traditional strategy for managing the risk of healthcare costs is the fully insured policy, which is when employers pay premiums to insurance carriers that assume the risk of covering employees based on the coverage benefits outlined in the purchased policy. More recently, the trending strategy is the self-insured benefits policy, in which employers establish their own health plan, pay expenses as they are incurred, and assume a portion of, or all, the risks of the cost.3
Fully insured healthcare policies are becoming costlier for employers, because of the increasingly high premiums. According to the Kaiser Health Benefits Survey for employers, the average single premium increased by 3%, and the average family premium increased by 5% in 2018.4 Making changes to its health benefits strategy has major implications on the financial security of a company, because healthcare is now one of the most expensive liabilities. The cost increase for 2019, predicted by the Mercer company, shows that the change in total health benefit cost per employee is growing faster than in previous years and continues to outpace inflation (Figure).5
To combat high premiums, employers have turned to the nontraditional model of incurring the risk themselves, and not using insurance carriers for that purpose. As of 2017, approximately 75% of private sector firms that have 500 or more employees offer at least 1 self-insured plan.6 Much of the increase in premiums and healthcare costs is attributed to specialty prescription drugs. Although the cost of healthcare was high in 2018, there was only a moderate increase in healthcare expenditures because of the use of services that target spending.5
Employers are looking for long-term savings and cost-control strategies that address improved care quality and lower spending using value-based contracting through Centers of Excellence or through direct contracting with health systems. A total of 48% of employers offer coverage for Centers of Excellence in cancer care, but only 10% of employers use plan design differentials to steer employees toward them or require that employees use Centers of Excellence for cancer care.5
A renewed interest is evident in direct contracting and working directly with the provider to cut out the “middleman” known as the health insurer. Only 6% of employers contracted directly in 2017, but this rate is predicted to grow to 22% by 2019, based on a survey of companies with at least 1000 employees.7 In the early 2000s, direct contracting initiatives were led by large employers, when healthcare spending was at an all-time high, at $4000 per capita. These early initiatives were unsuccessful because of the inability of gaining “sufficient share within their local markets to compete with national insurance companies.”8
Now at an even higher healthcare spending rate of $10,000 per capita, small, midsize, and larger employers are revisiting direct contracting, to reduce spending and improve the quality of care.8 Although large employers are primarily the trendsetters in healthcare benefits, midsize employers can look to their standards when implementing changes.
Value-Based Care: Making a Quality Choice
Identifying and developing high-value networks has been a slow undertaking. Plan administrators build networks based on price and location, because quality and value are difficult to assess.9 Centers of Excellence do not have a regulated definition by an oversight committee. This can lead to varying quality of care, resulting in increased spending from hidden costs at poor-quality centers and hospitals. The World Health Organization (WHO) defines quality of care as the “degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge.”10
Major strides have been made in cancer care, with improved survival rates in high-income countries, but widespread evidence of continued poor quality of care related to healthcare facility–associated infections, nonadherence to evidence-based care, increased incidence of antimicrobial resistance because of prescription misuse, and medication errors. A total of 15% of hospital expenditures in high-income countries are used to correct preventable complications of patient care.10
Hospitals, Centers of Excellence, and sites of care that are being reviewed for partnership through an employer self-insure strategy should look to the 7 measurable characteristics of quality care determined by the WHO, including effectiveness, safety, people-centeredness, timeliness, equity, integration of care, and efficiency.10 Employers can utilize databases that transparently report hospital performance based on patient safety records and other metrics to identify high-value care.11
For quality cancer care services, choose an accessible health system with an accredited Center of Excellence by The Joint Commission in hematology and oncology. Accrediting bodies will evaluate performance measures and adherence to clinical practice guidelines.12 Published guidelines contain common criteria for Center of Excellence consideration that focus on the use of multidisciplinary teams in inpatient and outpatient clinics, a robust radiation oncology program with board-certified providers, practice of evidence-based medicine, and availability of cancer-related clinical trials.13 Making a quality choice now may prevent higher total costs later.
New Financial Structure and Alternative Risk Management
Self-insured policies, especially direct contracting, give employers increased control over their healthcare expenditures. Simply put, insurance is a way to manage risk; an alignment of expectations between employers and providers is needed before considering a partnership.
“Providers may underestimate the risk involved in earning an acceptable return,”8 according to Allison M. Howard, JD, Chair, Employee Benefits & ERISA Practice Group, Crowe & Dunlevy, Oklahoma City.
A successful direct contracting model requires access to comprehensive care, not just to specialty services. Employers must have realistic expectations about potential savings and results. Each direct contracting model is unique and depends on its respective circumstances and population.
Intel, with 3500 of its New Mexico–based employees, and Presbyterian Healthcare Services partnered under a direct contract in 2013.14 The objective was to promote evidence-based treatment of chronic conditions by having 100% of the cost of preventive care and prescription drugs covered for asthma, hypertension, and diabetes. This arrangement included shared costs and pay-for-performance and addressed cost and qualitative measures.14
According to an Intel report, the program did not meet the cost target at year 1. The total cost at the end of the year was 3.6% higher than expected, because of the unanticipated increase in patient engagement. The program did exceed targets regarding utilization of evidence-based medicine, member experience, and “Right Time, Right Services” initiative. Because of the end-of-year performance, the targets for year 2 were reevaluated and adjusted accordingly.14
The core of these risk models can be applied for any therapeutic area. Regarding cancer care, understanding the management and the cost of services related to the disease can determine which metrics are valuable in assessing quality and cost-effectiveness. These financial structures can use different payment methods, such as a shared-risk model, incentivized payments based on quality measures, or procedure- or condition-based bundles.15 Risk management is built on identifying specific unmet healthcare needs and exploring exclusive providers (or Centers of Excellence) to bridge gaps, while maintaining current health plans for other services.16
Communication Model: Increasing Awareness
Of the companies employing 1000 or more people, 81% of the employees are enrolled in self-insured plans.17 This does not mean that all the enrollees are using cancer care services provided by their employers. Overall, 68% of employers do not have accessible, organized, and systematic communication efforts for cancer-related benefits, according to a survey conducted by the Northeast Business Group on Health.18 Better communication and integration of benefits are needed so that these programs can be used externally between physicians and patients, and internally by employers and employees.
A communication plan should be used to educate employees about overuse of a wide variety of healthcare services and to promote improved communication between patients and their providers. A multi-year direct contract between General Motors and Henry Ford Health System incorporates patient engagement tools.19 This ensures that at-risk patients receive support and appropriate medical management. The contracted medical provider should be evaluated on their ability to provide an integrated, HIPAA-secured, electronic medical records system that allows ease of communication between a common IT platform to reduce errors and avoid duplicate tests. Without appropriate communication, patients or employees can slip through the gaps that can cause unintended harm and costs.
An internal communication plan regarding the offered benefits should be geared toward the appropriate audience, revolving around company culture, branding, and personalization.20 Less than one-third of employers using value-based healthcare provide cancer-related training and resources for supervisors, managers, and coworkers.18
Managing cancer involves more than a treatment; it is the coordination of care that requires the support of all care team members, including the employer. It is important for employers to take an active role in directing employees to trusted institutions that have a proven track record of exceeding quality measures.
According to a survey from the Midwest Business Group on Health, 44% of employees do not know what a Center of Excellence is.21 Creating effective communications can increase awareness about the value-based benefit of offered programs. A framework for a communication plan includes proactive outreach to patients about benefits, surveys related to satisfaction with services, and an online portal for evidence-based resources and patient communication guides.22
Communications about changes in benefits, access to programs, and information about wellness should be frequent, clear, and concise. Underutilization of these employee benefits can lead to long-term costs.
As a group, employers represent an important insured entity that purchases healthcare for their employees and families. For midsize employers that are looking to implement a value-based model such as direct contracting, success starts with identifying the right partners who share a common goal—providing employees with high-value cancer care, while reducing costs.
The traditional models of cancer care have proved to be expensive and unsustainable. The total health benefits cost for large and midsize employers has been increasing over time. Comparatively, only a moderate increase occurred in 2018. The better-than-expected change in costs can be contributed to organizations that are taking the right steps in implementing high-value versus low-value care. As large companies are transforming their healthcare reimbursement model, the more cost-sensitive midsize employers can look to the high-value strategy to help reduce the cost burden for them and for their employee or plan members.
- U.S. Small Business Administration. Table of size standards. www.sba.gov/document/support–table-size-standards. Accessed January 21, 2019.
- National Center for the Middle Market. Middle market indicator overview. www.middlemarketcenter.org/middle-market-indicator-overview. Accessed January 21, 2019.
- Hansard S. More smaller companies are self-insuring health benefits. Bloomberg BNA. August 7, 2017. www.bna.com/smaller-companies-selfinsuring-n73014462857. Accessed January 21, 2019.
- Henry J. Kaiser Family Foundation. 2018 employer health benefits survey. October 3, 2018. www.kff.org/report-section/2018-employer-health-benefits-survey-summary-of-findings/. Accessed January 21, 2019.
- Mercer. Mercer National Survey of Employer-Sponsored Health Plans. www.mercer.us/what-we-do/health-and-benefits/strategy-and-transformation/mercer-national-survey-benefit-trends.html. Accessed January 21, 2019.
- Agency for Healthcare Research and Quality. 2017 Medical Expenditure Panel Survey-insurance component: Table I.A.2.a. https://meps.ahrq.gov/data_stats/summ_tables/insr/national/series_1/2017/tia2a.htm. Accessed January 21, 2019.
- Willis Towers Watson. High-performance insights — best practices in health care: 2017 22nd annual Willis Towers Watson Best Practices in Health Care Employer Survey. www.willistowerswatson.com/-/media/WTW/PDF/Insights/2018/01/2017-best-practices-in-health-care-employer-survey-wtw.pdf. Accessed January 21, 2019.
- Howard AM. Back to the future: provider-employer alliance direct contracting for health benefits. Health Lawyer. 2018;30:1, 3-10.
- Olson A, Japinga M, Crook H, et al. Value innovations by employers: examples beyond cost sharing. Durham, NC: Duke Margolis Center for Health Policy; August 2018.
- World Health Organization; Organisation for Economic Co-operation and Development; the World Bank. Delivering quality health services: a global imperative for universal health coverage. 2018. http://apps.who.int/iris/bitstream/handle/10665/272465/9789241513906-eng.pdf?ua=1. Accessed January 21, 2019.
- Midwest Business Group on Health. Employer toolkits: Leapfrog tools. www.mbgh.org/resources/employertoolkits. Accessed January 21, 2019.
- The Joint Commission. Disease-specific care certification review process guide. 2019. www.jointcommission.org/assets/1/6/2019_Disease_Specific_Care_Organization_RPG.pdf. Accessed January 21, 2019.
- National Business Group on Health. An employer’s guide to cancer treatment & prevention: supporting document: criteria for cancer Centers of Excellence (COEs) network programs. 2013. www.businessgrouphealth.org/pub/?id=f3131588-2354-d714-5137-54d58bc3882d. Accessed January 21, 2019.
- DeVore BL, Cates L. Disruptive innovation for healthcare delivery: year 1 report from Intel Corporation and Presbyterian Healthcare Services. 2015. www.intel.com/content/dam/www/public/us/en/documents/white-papers/disruptive-innovation-healthcare-delivery-paper.pdf.
- Nobel J, Pickering L, Sherman C, Sasser E. High value cancer care: guidance for employers. New York, NY: Northeast Business Group on Health Solutions Center; October 2016.
- Catalyst. Direct contracting. www.catalyze.org/product/get-started-direct-contracting-2/. Accessed January 21, 2019.
- Agency for Healthcare Research and Quality. 2016 Medical Expenditure Panel Survey-insurance component: Table I.B.2.b.(1). https://meps.ahrq.gov/data_stats/summ_tables/insr/national/series_1/2016/tib2b1.pdf. Accessed January 21, 2019.
- Nobel J, Pickering L, Sasser E. Employers and cancer care quality: a closer look. New York, NY: Northeast Business Group on Health Solutions Center; April 2016.
- PR Newswire. Henry Ford Health System launches “Direct to Employer” healthcare contract with General Motors. August 6, 2018. www.prnewswire.com/newsreleases/henry-ford-health-system-launches-direct-to-employer-healthcare-contract-with-general-motors-300692613.html. Accessed January 21, 2019.
- Midwest Business Group on Health. Employer Toolkit on Benefits Literacy and Consumerism: elements that affect your strategy. 2017. www.mbgh.org/ctk/newitem2/elementsthataffectyourstrategy. Accessed January 21, 2019.
- Midwest Business Group on Health. Employee health engagement: identifying the triggers and barriers to engaging employees in their health benefits and wellness programs. November 2011. https://higherlogicdownload.s3.amazonaws.com/MBGH/f665b23a-8642-4ce4-b9a7-e16e56de7b0b/UploadedImages/FINAL%20MBGH%20Engagement%20White%20Paper%20111811.pdf. Accessed January 21, 2019.
- National Business Group on Health. ACO toolkit: a roadmap for employers. 2017. www.businessgrouphealth.org/pub/?id=1D7E8473-782B-CB6E-2763-C067C1684074. Accessed January 21, 2019.