3 Ways That Large Employers Influence Health Insurance Costs, Coverage

October 18, 2023 - Traditionally, health insurance companies have been the face of the payer industry, for better or for worse. But companies have incredible sway in the health insurance world, particularly large employers.

Employers offer and manage healthcare benefits for more than half of all Americans. In 2021, 54.3 percent of the US adult population was covered under an employer-sponsored health insurance plan for either the full year or part of it, according to the US Census Bureau.

So how do large employers influence the health insurance space? Below, HealthPayerIntelligence will explore three areas of healthcare coverage in which employers play a significant role.

Health benefit design

Health benefits are critically important to employers because they impact spending and employee retention. During the Great Resignation, employees and human resources (HR) professionals ranked healthcare and health insurance benefits as the fourth and fifth most important tool for retaining employees, respectively, at a time when retention was challenging.

Large employers, especially those that are self-insured, have a lot of input on health benefit design. It is one of the key ways that they can influence the health insurance space and healthcare spending trends.

Healthcare benefits priorities might fluctuate based on the year due to a number of factors.

Before the coronavirus pandemic, cost management was a significant goal for employers’ health benefits designs, according to a Mercer survey. However, in 2022, 41 percent of employers with 20,000 employees or more highlighted behavioral healthcare as a key focus. Other benefit priorities included managing specialty drug costs (38 percent) and improving care for high-cost employees (29 percent).

Four key employer health benefits trends could shape employers’ decision-making in benefit design. First, employers are likely to seek benefits that will lower costs for their employees, particularly in the context of a difficult economy, Harvard Pilgrim HealthCare suggested. With prices rising across the US and inflation outpacing wages, the workforce is not in a position to take on more healthcare costs.

Second, employers may adopt family- and caregiver-related benefits. For example, some Medicare Advantage plans and commercial plans have offered opportunities for caregiver feedback or technologies to support caregiving members’ wellbeing as they manage their caregiving tasks. These benefits are crucial to the estimated 60 percent of caregivers with a job who work full-time.

Third, in the wake of the coronavirus pandemic, Americans have recognized the benefit of flexible working hours. For workers who usually have no other option than to schedule doctors’ visits during the workday but who also have limited time off, an inflexible schedule can be a deterrent to taking care of their health.

Offering a flexible work schedule is a health benefit that many employers may want to pursue, Harvard Pilgrim HealthCare recommended. Flexible work schedules could mean the ability to work from home on certain days, which may reduce time spent traveling to a doctor’s office if the home is closer to the doctor’s location. It could also mean adopting a four-day workweek, among other possibilities.

Finally, the need to address health disparities in health benefits is becoming increasingly visible as more evidence of health benefits inequities emerges. For example, in a recent study from Deloitte, researchers found that employed women pay an estimated $15.4 billion more in out-of-pocket healthcare costs than men per year.

Employers can support historically underserved populations by offering tailored benefits, Harvard Pilgrim HealthCare suggested. This might mean providing specialized behavioral health benefits for members of the LGBTQ+ community or improving coverage for women’s health, to name some examples.

Some benefits are mandatory and regulated by laws like the Affordable Care Act (ACA). Under the ACA, if employers offer a plan on the Affordable Care Act marketplace, it must include all of the essential health benefits. However, these rules apply mainly to small businesses and do not apply to self-insured organizations.

Access to disease management programs

In addition to offering benefits that meet the needs of the greater employee population, employers influence the payer space by developing programs that serve specific disease states.

With six out of ten adults in the US managing at least one chronic disease, employers need to be aware of and support the disease management needs of their workforces.

Mental and behavioral healthcare coverage have gained an increasing share of attention, especially since the Affordable Care Act required individual and fully insured small group plans to cover essential health benefits.

After the coronavirus pandemic devastated Americans’ mental health and wellbeing, The most common tool that employers offer, according to a Business Group on Health survey, is online resources. These include webinars and apps related to managing mental health conditions.

A significant share of employers also have considered expanding their mental healthcare networks. Mental healthcare navigation programs are another important benefit that more than three out of ten employers adopted in 2023.

Most employers provide manager, peer, and employee training programs so that employees can notice when a colleague is experiencing a mental health condition and appropriately support their wellbeing. Additionally, many employers offered low- or no-cost telemental healthcare or on-site mental healthcare.

Employers are also bolstering their chronic disease management programs. These programs generally involve a structured treatment plan and support for disease management activities with the ultimate goal of improving members’ quality of life.

Employers can work with their payers or their benefits managers to design chronic disease management programs that account for comorbidities, incorporate wellness programming, and involve employer and payer efforts to keep members engaged and encourage adherence. Employers’ overarching strategies should involve care coordination, member education, and screenings.

One payer changed the traditional wellness program model by centering its solution on members’ choices. UnitedHealthcare already boasted a range of disease management options but ran into the same problem that many employers and payers experience: the major insurer struggled to engage members and keep them committed.

To resolve this issue, UnitedHealthcare introduced a new model for financial rewards. It allowed members to pursue multiple paths to wellness, expanding the definition of wellness from simply “fitness” to a more holistic definition. Members had more options regarding what technologies they could use to track their progress.

Additionally, the program permitted short-term goals that reset each new day, as opposed to long-term goals that can be emotionally exhausting to maintain. The payer also leveraged digital health tools to streamline the member experience.

Experts in employer-sponsored health plan trends and design have recommended incorporating social determinants of health (SDOH) data into wellness programming efforts. By integrating SDOH information, employers can more effectively prioritize subpopulations and design interventions around employee needs.

Affordability for employees

Finally, employers can influence health insurance and healthcare costs by focusing on improving affordability for employees.

Annual family premiums for employer-sponsored health insurance grew 7 percent in 2023 and the average worker’s annual contribution toward healthcare premiums rose $500, according to the 2023 KFF Employer Health Benefits Survey.

As healthcare costs spiral out of control, employers can take steps to shield their employees from rising prices. This might require adjusting health benefits to prioritize lower costs and higher quality.

For example, some employers have gravitated toward adopting advanced primary care. This method uses enhanced access to care, improved data analytics infrastructure, a strong referral system, and other components to reduce costs. One employer reported $3 million in savings as a result of this approach, but the results take time to catch up with the strategy.

Other employers have integrated their health benefits, bringing together interdisciplinary services and teams to break down siloes that increase care costs. This is a common strategy that over eight in ten employers implemented in an Anthem survey. The approach tends to yield a better return on investment for member engagement efforts.

Large employers that have sufficient leverage can improve affordability by negotiating individually with hospitals in their networks. Hospital prices fuel much of employers’ skyward trend in healthcare spending.

Negotiating with hospitals may seem daunting, largely because determining a fair price is a challenge.

However, the National Alliance of Healthcare Purchaser Coalitions (National Alliance) shared a calculus that standardizes fair price assessment for employers. It involves discerning the appropriate price by comparing the hospital’s price to a specific benchmark and comparing the hospital’s price to its peers’ prices, resulting in a fair price range.

Employers should leverage available data in their conversations with hospitals. They may also find it useful to involve employer consultancies or coalitions to gain more leverage.

But even when employers do not have the power to negotiate costs directly with providers, they can use cost levers such as deductibles and cost-sharing amounts to steer members toward higher-quality care that will, ultimately, result in lower costs.

Employers can collect data on low-value care to assess where members’ utilization patterns are increasing unnecessary spending. They can hold payer partners accountable by setting expectations around utilization or demanding refunds for utilization patterns that do not improve.

Advanced payment models and tiered or high-performance provider networks can improve the quality of care and help members identify high-quality providers. Episodes-of-care payment models can also be useful but are sometimes difficult for employers to implement.

While the problem of high healthcare costs is a complex issue that requires multi-stakeholder alignment and regulatory change to address, employers are not victims. They can use their influence with payers and providers to shield employees from high costs and improve their workforce’s wellness and healthcare spending.