4 Employer Health Benefit Strategies That Lower Healthcare Costs
Advanced primary care, episode-based benefits, integrated health benefits, and association health plans are employer health benefit strategies that can help employers manage costs.
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- As employers seek to lower costs, a few key employer health benefit strategies are showing positive results.
Healthcare costs are on an unsustainable trajectory, according to employer respondents in a Kaiser Family Foundation survey. Almost half of the 300 large employer respondents said that they moderately agreed that costs for health benefits are excessive, and 34 percent considerably or strongly agreed that the costs were excessive.
To combat expensive health benefits, employers have implemented various strategies in their employer-sponsored health plans. Advanced primary care, episode-based benefits, integrated health benefits, and—for small businesses—joining an association health plan are tactics that have demonstrated some cost-savings.
Advanced primary care
Advanced primary care can pull together the successful elements of many past employer strategies—including centers of excellence, onsite or near site clinics, and employee wellness programs—in order to diminish employers’ healthcare spending, according to a Duke-Margolis Center report.
The National Alliance of Healthcare Purchaser Coalitions states that advanced primary care requires enhanced access to care, increased time between provider and patient, an infrastructure backbone with elements such as data analytics and staff training, a focus on improving patient outcomes, a strong referral system, and integrated behavioral healthcare.
READ MORE: How Employers Can Control Costs with Episode-Based Benefit Plans
Employers in the large group health insurance market are catching on to this concept. Slightly more than half of large employers indicated that they would be implementing some aspect of the advanced primary care model in their health plans in 2022, the Duke-Margolis Center report indicated.
Vera Whole Health implemented an accountable, advanced primary care model that abandoned fee-for-service reimbursement in favor of a person-level, capitated model. As a result, the primary care organization reported more than $3 million in savings in a single market.
However, the Duke-Margolis report emphasized that these models take time to take effect and experts in the accompanying webinar underscored that the healthcare system will reap the greatest benefits if the advanced primary care model becomes more ubiquitous.
Episode-based benefits
Employers may also introduce episode-based benefits in order to control costs, a report from Manatt Health indicated.
An episode-based benefit plan identifies all of the costs associated with a single episode of care for a particular health event, including the average length of time and types of services related to that episode of care that they will cover.
READ MORE: 5 Steps Employers Can Take To Implement Advanced Primary Care
Episode-based benefits are particularly effective because they provide ample opportunities for employers to make nuanced adjustments that can impact healthcare spending.
The report identified three major ways in which employers can tweak cost-sharing levers in order to decrease their cost burdens.
First, employers can change the amount of cost-sharing within an episode of care. They can boost internal levers for out-of-pocket healthcare spending including deductibles, copays, and coinsurance when employees use low-value services.
Second, employers may be able to find unique ways to adjust cost-sharing within specific episodes of care. They could shift the cap on how much a health plan will cover for a particular episode of care or adjust the stop-loss thresholds based on employees’ low or high value care decisions.
Lastly, rewards can be very effective in incentivizing employees to pick lower cost sites of care and in-network, episode-of-care providers. Rewards can come in the form of financial reimbursement, but employers can use other forms of value and member savings to acknowledge cost-saving decision-making behaviors.
Integrated health benefits
READ MORE: Pros, Cons of Small Employers Joining Association Health Plans
Employers have also used integrated health care benefits to bring down healthcare costs.
Clinical integrated healthcare involves engaging healthcare providers in an interdisciplinary manner to meet the member’s needs. Integrated health care benefits pursue a similar model in health insurance.
Integrated health care benefits pull together typically-siloed benefits into one streamlined system, using the condensed data stream to better communicate with members, according to an Anthem report. Benefits that are popular to integrate include vision, pharmacy, dental, and disability benefits.
Employers may also include non-clinical benefits such as employer assistance programs and supplemental health products as well as absence management.
Over eight in ten of the employer respondents in Anthem’s survey leveraged an integrated health care benefits model in order to improve cost-effectiveness in 2020. Anecdotal, qualitative interview responses highlighted the cost savings for both the employer and the employee.
The report quoted one employer as saying that they received fewer sick and disabled claims after implementing an integrated health care benefits model, which saved them in healthcare costs.
However, the report also noted that more employers who use this model placed an emphasis on member engagement return on investment measures, as opposed to savings. Over half of the employers in the large group health insurance market and national markets measured employee engagement, as opposed to only three in ten employers who measured savings.
Association health plans
Many of the studies that analyzed healthcare savings strategies focused on employers in the large group health insurance market or national plans. But employers in the small group health insurance market are finding strategies to save as well.
Some small employers have decided to join an association health plan in order to achieve lower costs.
An association health plan is a group of small businesses that band together to offer medical benefits and, if they achieve a high enough number of covered lives, can qualify as a large group health insurance marketplace plan.
With the greater size, small employers can have greater leverage to negotiate for more stable rates.
Some association health plans have reduced members’ premiums by 20 to 30 percent. The strategy has also diminished deductibles for employees. Employers who would not be able to afford offering health insurance to their small number of employees may find the costs more manageable in an association health plan.
However, this approach has achieved mixed results. Association health plans qualify as fully-insured large group health plans, which means that they do not necessarily have to offer all of the essential health benefits stipulated under the Affordable Care Act. Association health plans can also deny coverage based on a pre-existing condition or set unique premium standards.
These loopholes can leave employees with higher costs in the end.
“Any savings that AHPs offer to healthier-than-average firms and workers likely come at the expense of higher costs for sicker-than-average firms and workers who remain in the ACA small-group and individual markets,” the researchers from the Center on Budget and Policy Priorities stated.
Employers—small and large—have a number of strategies at their disposal to lower costs using healthcare benefits. But employers should expect many of these models to take time before they start to demonstrate strong healthcare savings, experts have warned.
