Plans do not want to narrow provider networks because employers prefer large networks, but it may be the only means of substantially lowering healthcare spending.
Employers are looking for broader provider networks, but healthcare payers who want to decrease the high cost-sharing must look for less expensive and fewer providers, a recent study by Kaiser Family Foundation (KFF) stated.
Premiums continued to rise in 2019, as premiums outpaced wage and inflation increases. Wage increases rose by 3.4 percent while inflation increased by 2 percentage points, the researchers reported.
Employer-sponsored health plans premiums averaged $7,188 for singles and 20,576 for families, representing a four percent and five percent increase over last year, respectively.
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Employees also face rising cost-sharing. Deductibles increased 36 percent since 2014 and 100 percent since 2009, to hit around $1,655 for single coverage, which is about the same as last year’s price.
Employees do not shoulder all of this burden alone, however. Sixty-one percent of individuals whose companies offer employer-sponsored health plans use it. As the employees’ costs increase, so do their employers’.
Provider networks have a significant effect on employers’ healthcare costs.
Choosing a low-cost provider proved to be difficult for employers, less than 50 percent of whom (46 percent) said that they were “satisfied” with their providers’ price range.
Despite this discontent, 84 percent of employers said that they were either “satisfied” or “very satisfied” with their provider network options. Smaller companies were more likely to experience dissatisfaction with their network.
One strategy that companies use to cut costs is to narrow their provider networks. However, for 30 percent of employers, the large size of a provider network was the main factor that drew them to a health plan, preceded by the provider network’s quality and cost.
Many employers value having a broad network too much to decrease it, even if that also means they could cut costs. A quarter of employers said a narrower network would only be worthwhile if they saved over 30 percent of costs, while 11 percent said they would be willing to narrow it for 20 to 30 percent savings.
But 39 percent said they would not narrow their provider network, regardless of the potential savings.
Mainly, employers said that they feared the repercussions for their employees, such as provider relationships being damaged or the employees’ reaction to the news.
Instead, employers might choose a tiered or high-performance network that stratifies providers by cost and incentivizes employees to use the lowest-cost available for their needs. For 14 percent of companies that cover 50 or more employees, this is their alternative to shrinking their network size.
A small number of employers make network arrangements directly with providers. Eight percent of large employers with a self-funded health plan pursue such contracts.
With these observations in mind, the study offered two options for health plans that want to appeal to cost-cutting employers: the plans can either narrow their networks or increase the cost-sharing.
If health plans want to effectively cut down their healthcare spending, plans have to be willing to reject more expensive providers in favor of more cost-effective options, even though this is not always attractive to employers.
“Other than increasing cost-sharing, this is the most (and maybe only) powerful cost-reducing tool that private plans have, but it is rarely employed,” the researchers stated.
Employers have to also consider include the Cadillac Tax, a 40 percent excise tax on plans with premiums past certain thresholds. The tax has already been delayed once and fifty-two percent of employers expect it to be delayed again by Congress. If they are wrong and the tax goes into effect, approximately 21 percent of employers could be affected.
Rebates for prescription drugs are gaining attention in the debate over prescription drug costs and the record high payout expected this year. Legal action on the form of these rebates could impact employers’ savings. Employers are fairly divided over rebates, with 27 percent believing that they receive “most” of the savings and 18 percent saying they get “very little” from the healthcare payers’ and pharmacy benefit managers’ negotiations.
Employers are also using health and wellness programs including health risk assessments and biometric screenings to keep costs down, the study mentioned. Incentives for such programs have become substantial, with 20 percent of large employers spending over $1,000 on their maximum incentive and even offering incentives to spouses for their wellness performance.
The problems that America’s healthcare system and employers currently face are not unusual, KFF reminded readers. Both the average deductible and the extent of employer-sponsored health plans coverage remained relatively the same compared to last year. Premiums rose, but not by a monumental increment, particularly in contrast to the start of the Millenium.
“An expanding economy and historically low underlying health care cost growth appear to have dampened any impatience for big changes, although predicted economic slowing over the next couple of years could push employers to consider more significant actions,” the study stated.
What sets this year apart, the researchers asserted, is the public conversation about healthcare reform, specifically expanding Medicare or creating a public option program. These new inquiries are putting employer-sponsored health plans in a new light, potentially allowing for more objective critique than in the past as it is more extensive than a year-to-year analysis.
“Regardless of its outcome, the national debate about expanding Medicare or creating public program options provides an opportunity to step back and evaluate how well employer-based health plans is doing in achieving national goals relating to costs and affordability. In doing so, it will be important to look past averages and examine how well the market serves the many different types of employers and working families in the many different circumstances that they face,” the study concluded.
Date: October 01, 2019