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The future of employer sponsored insurance: 4 questions to consider today

With a new President-elect, large self-insured companies innovating new models, and COVID-19 illustrating the upsides of value-based care, is it time to reconsider the long-standing ESI approach?

Tom Sullivan | December 9, 2020

Much as it has with so many aspects of the health care system, COVID-19 has highlighted the importance and vulnerabilities of employer sponsored insurance, particularly given the millions of Americans who have lost their jobs, and in turn, their health benefits during the turbulence of 2020.  

This year’s circumstances, in fact, have raised the following questions about the future of employer sponsored insurance: 

    • Will President-elect Joe Biden’s administration enact sweeping policy changes that impact ESI?  
    • How will large enterprises such as Amazon, Boeing, Disney, and Walmart evolve during the pandemic and post-COVID-19?  
    • What are some of those practical changes in payment, and in partnership that we can look at going forward?  
    • And looking ahead, what are the best bets that CEOs should be placing now to prepare for the future?  

Will President-elect Joe Biden’s administration enact sweeping policy changes that impact ESI? 
With 170 million employees and dependents — nearly half of Americans — covered by employer sponsored health insuranceit has been described as “the lifeblood of the U.S. health care system,” by futurist and author Ian Morrison.  

Morrison hosted the Health Evolution virtual gathering, The Future of Employer Sponsored Health Insurance: Implications for Healthcare Stakeholders with Elizabeth Mitchell, CEO, Pacific Business Group on Health and Barry Arbuckle, President & CEO, MemorialCare Health System 

Morrison asked Arbuckle and Mitchell whether they are anticipating the new administration to make substantive changes that could alter ESI.  

No striking revolutionary change, which, frankly, is what Biden ran on,” Arbuckle said.He ran on building on the Affordable Care Act. And I think we’ll see it being rebuilt because it’s been somewhat dismantled over the last couple of years.”  

Arbuckle continued that perhaps the only change to potentially impact employer sponsored insurance could arise if the Biden Administration pushes to lower the eligibility age for Medicare from 65 to, for instance, 50 years old — adding that if that did happen, he would expect Congress to offer choices to employers who offer insurance for their employees, likely because that is the only way the legislation would pass.  

Mitchell affirmed the importance of having such options. “Whether it’s a public option, Medicare for All or I’ve heard recently Medicare Advantage for All, we still need to deal with payment reform because the incentives are wrong,” Mitchell said. “I think there’s significant opportunity to pay differently and have better measures of accountability.” 

Even while questioning whether ESI is the right approach or a lingering artifact from World War II-era price and wage controls, Morrison said: We’ll be in employer sponsored coverage as a vehicle for health care delivery and financing for some considerable time.”  

How will large enterprises such as Amazon, Boeing, Disney, and Walmart evolve during the pandemic and post-COVID-19 
PBGH counts among its members large enterprises that Mitchell said are under economic pressure.  

“Selfinsured employers are bearing all of the risk, 100 percent of the risk for costs. Then they see the RAND studies that show they’re being charged 700 percent to 800 percent the cost of Medicare, and that’s really not a good look,” Mitchell said. “That’s just not something they would see in their other supply chains.”  

Mitchell continued that when companies such as Disney layoff nearly 30,000 employees, it delivers an immediate hit to the companies and covered lives moving into the system.  

“The parties over, in terms of thinking you can pass as many costs or higher prices as you’d like over to the employers and they’ll just absorb them,” Mitchell said. 

Arbuckle explained that MemorialCare has an arrangement with Boeing under which the health system takes complete risk for both the total cost of care and quality.  

“Boeing is able to pass that risk on, frankly, where it belongs: to the providers to work with the patients, the consumers in alignment. And that’s really the best model,” he added.   

While Mitchell agreed that those types of arrangements are the model of the future, Arbuckle added that MemorialCare has been frustrated by how slowly it has taken to move in that direction, even to downside risk ACOs.  

“For us, it’s frustrating because we’ve invested in a large infrastructure to accommodate that and it’s been a slow process,” Arbuckle added. “It’s unfortunate to say but the financial impact of this pandemic might actually accelerate the movement toward some of these valuebased products. The question is: will providers be ready?”  

Exactly how those organizations will evolve remains to be seen but the experts discussed some of the broader changes in payment models that may emerge from the pandemic.  

What are some of those practical changes in payment, and in partnership that we can look at going forward?  
Risk-bearing direct relationships appear to be the next frontier in value because progress achieved to date has been within Medicare Advantage and managed Medicaid, Morrison said, while employers lean toward high deductible health plans.  

The time may have come to really double down on amplifying these relationships,” Morrison added. “And part of it has to do with prices and transparency.”  

Mitchell said that PBGH members are recognizing that it’s time to intervene more directly in the system, because transparency is necessary for a more competitive marketplacethough it’s not sufficient to fix the health care system. Mitchell also debunked the myth that transparency enables consumers to shop for care services — and Arbuckle added that with MemorialCare’s 220 locations and more than 200 contracts with health plans, survey results show that only 10 percent of people actually compare prices.   

One possible future, though, is intelligent benefit design that steers people toward providers based on cost and quality. Arbuckle explained that MemorialCare offers employees a narrow network, high-value HMO and a broad-based PPO. The per-pay-period cost of the high-value network is $5 and the PPO costs $108. 

“That drives people who are looking to see if they use the same doctors in the same network,” Arbuckle said. “Seventy percent of our employees use that product.”  

Mitchell added that employers are increasing comfortable with steering consumers toward certain care services being aligned with specific providers, including in primary care settings 

“We surveyed our members a couple of months ago and 100 percent said they needed to change payment for primary care, Mitchell said.  

The first issue is that primary care is underpaid. According to data PBGH recently collected, in fact, the U.S. spends in the range of 7 percent to 11 percent on primary care while European countries that have a strong primary carebased system spend at least 14 percent. 

“There’s also a payment model issue, and I think we saw in COVID-19 that practices paid on a prospective, population-based payment fared much better because they’re not reliant on fee-for-service visits to stay afloat,” Mitchell explained.  

Beyond embracing new payment models, health care executives have the opportunity to better integrate primary care with behavioral health and social determinants through partnerships if they can properly fund those programs.  

MemorialCare embarked on a pilot program two years ago to integrate behavioral health into its primary care overseen by a psychiatrist. In this initiative, if a primary care physician identifies any signals of anxiety or depression, the patient can access behavioral services rather than waiting two weeks for an appointment.  

The uptake rate is unbelievable and the savings we’ve achieved remarkable,” Arbuckle explained. “Now, would a health system on its own do that in a fee for service model, hire a bunch of LCSWs that they’re not reimbursed for only to reduce the reimbursement they receive downstream? That doesn’t make any economic sense — but under risk models it makes incredible sense.” 

Looking ahead, what are the best strategic bets CEOs should be placing now to prepare for the future?  
The point of embracing risk is to undertake initiatives such as the aforementioned MemorialCare integrated practices to address adverse health events upfront.  This serves as a means to mitigate what could ultimately become expensive in the near future. But that requires certain determinations that bear their own risk.  

“When you think about direct contracting and the suite of options and models that have been tried, what’s the most impactful? Which models seem to be the best?” Morrison asked, listing centers of excellence for procedural work, employer-provider relationships, direct contracting, being fully at risk vs. partially at risk as options.  

I think it’s a combination,” Mitchell said. She cited centers of excellence PBGH helped Walmart establish that resulted in nearly 50 percent cost savings from avoiding unnecessary procedures, reducing readmissions and other services that drive up cost but do not improve care or outcomes.  

“There’s huge opportunity in the prospective bundle for centers of excellence. There’s also significant need for more prospective, population-based payment for primary care,” Mitchell added.“You need to have both and that’s where our members are headed.”  

Arbuckle agreed that the bundles and centers of excellence are an effective way to attack highcost areas and can be simpler to implement than comprehensive large employer contracts with a single network.  

“It’s not just working with one health system and making it their problem to cover your geography and pass the risk onto them and hold the quality parameters out there as well,” Arbuckle said.  

He pointed to MemorialCare’s relationship with Boeing, at the beginning of which the total cost of care, including pharma, was one of his greatest concerns — because pharma is not under MemorialCare’s control and had grown increasingly expensive year over year without showing signs of slowing down.  

Interestingly, even though they were working with a pharmacy benefit management company for years, in the first year, we reduced our pharma costs by 22 percent,” Arbuckle said. “And that was as the market was going up 8 percent or 9 percent.”  

MemorialCare achieved those results by hiring a pharmacist who didn’t dispense medicine but, instead, reviewed every prescription. That enabled MemorialCare to identify me-too drugs, where two drugs are combined and the total cost can be as high as $1,500 compared to the $40 at Savon or CVS, Arbuckle added.   

Mitchell explained that in PGBH’s primary care work, a CMMI funded project that involved working with small practices over five years enabled them to avoid approximately 67,000 unnecessary hospital admissions by delivering the right care at the right time.  

“This just really underscores the need for delivery system reform,” Mitchell said.“You can’t just paper over the current system and expect it to work.”  

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About the Author

Tom Sullivan, EVP & Editor-in-Chief of Digital Content

Tom Sullivan brings more than two decades in editing and journalism experience to Health Evolution. Sullivan most recently served as Editor-in-Chief at HIMSS, leading Healthcare IT News, Health Finance, MobiHealthNews. Prior to HIMSS Media, Sullivan was News Editor of IDG’s InfoWorld, directing a dozen reporters’ coverage for the weekly print publication and daily website. Contact: toms@healthevolution.com or @SullyHIT on Twitter.