Los Angeles, CA—The mission of private exchanges that arose with the passage of the Affordable Care Act (ACA) has employers viewing healthcare as an investment rather than an expense, analyzing the competitors’ healthcare offerings, and holding the employee accountable for its use.
“Healthcare is now recognized as an investment to be optimized, not an expense to be minimized,” said John Kahle, Senior Vice President and Chief Wellness Officer at Intercare Insurance Solutions, who spoke on emerging employee perspectives of healthcare at the Fourth Annual Conference of the Association for Value-Based Cancer Care.
In considering healthcare as an investment, insurers are realizing that less care is not necessarily less expensive care, and that more care is not necessarily better care. Employers are recognizing that health is one component of a business strategy that may improve productivity and a company’s financial performance, said Mr Kahle. As part of a business strategy, therefore, healthcare must deliver value.
Private versus Public Exchanges
A private health insurance exchange may make sense for some companies, he said. Private exchanges have greater certainty of cost, can increase employee choice, and can accelerate “consumerism” (Table).
The typical profile of an employer opting for a private exchange is an employer that seeks predictability in cost and budgeting, wants a defined contribution focus, wants improved decision-making technology, wants more choice of plans, and that prefers a hands-off enrollment process.
A private exchange is not a way out of the benefits business, said Mr Kahle, and will incur additional cost to implement. Early feedback from employers suggests that most companies want more evidence that private exchanges can deliver greater value for active plans.
In private exchanges, a consequence of ACA surcharges being levied against insurers and employers is a shift in cost to the employee. These surcharges are increasingly being added to the premiums of tiered healthcare (platinum, gold, silver, and bronze) plans. These charges can include the Patient-Centered Outcomes Research Institute cost, the transitional fee, and an insurance fee.
Mid-level employers with 100 to 1000 employees will race to the bronze plan out of financial necessity, said Mr Kahle, which shifts more costs to the employee. Variable employees, defined as those who do not work full time, but who work variable hours, will have their salaried working time closely monitored to ensure that they do not exceed 29 hours, he added.
Additional savings may be obtained by not offering spousal coverage, with the consequence that spouses may qualify for subsidies under the ACA given that an affordable plan was not available to them. This change may be difficult to communicate to employees, who are used to employer-sponsored plans that cover their spouses and dependents, Mr Kahle said.
Although the rise in healthcare costs can be slowed, these costs will continue to increase. With the new “healthcare as an investment” paradigm, a way to offset the increased cost of healthcare is to invest in employees’ preventive healthcare, thereby increasing employee productivity, said Mr Kahle.
As a business strategy, companies are now evaluating their employee healthcare expenses versus those of their competitors. “If I can deliver healthcare to my employees at $8000 a year, and my competitor, the one that I’m locked horns with on a regular basis, has a cost of $9000 a year, I have $1000 a year per employee that I can do something with,” Mr Kahle said. “I can make more money, or I can take it and invest it. Healthcare became a part of a business strategy.”
In addition, companies that are involved in acquisitions will examine the cost of healthcare at the company they are looking to purchase.
Patient accountability is the last paradigm shift, said Mr Kahle, because plans are being designed to incorporate patient responsibility. The average employer pays 73% of the cost of employees’ healthcare and 100% for preventive care (under the ACA), so employers will want to ensure that employees and their dependents are responsibly using their coverage.
If a patient is nonadherent to treatment or routine screening, the employee could be held accountable for their care. For example, Mr Kahle said, if a patient with a low-deductible plan misuses the plan by creating a lowest value claim (emergency department visit) instead of a high-value claim (preventive care), the health plan could revert to a high-deductible one.