How States, Employers Control ESI Healthcare Spending Long-Term

September 10, 2020 - States, employers, and the federal government must each play a role in supporting sustainable employer-sponsored insurance spending solutions during the coronavirus pandemic, a recent United States of Care (USofCare) report declared.

“COVID-19 has changed both the world and our health care system in ways that seemed unimaginable just months ago,” Emily Barson, executive director at USofCare, said in a press release that HealthPayerIntelligence received via email.

“At a time when our nation needs people to have access to care now, more than ever, the pandemic has magnified the risks that come from tying our health security to our jobs.”

However, USofCare researchers found that some states and employers have done a better job establishing long-term solutions to healthcare spending problems that the pandemic highlighted, instead of implementing quick fixes like the federal government.

Certain states started lowering healthcare costs across payers well before the pandemic and thus were better positioned to manage the onslaught of costs.

Rhode Island, for example, took the reins on its commercial insurance market by regulating primary care healthcare spending while maintaining reasonable commercial premium levels. Many of its healthcare spending control measures were already well-established by the time coronavirus hit and had proven their worth.

For example, the state capped inpatient and outpatient inflation at the Medicare rate plus one percentage point, it put hospital systems in value-based payment models, and gradually inched primary care spending upward but disallowed plans from boosting premiums to cover the increases.

Ten years later, the state has significantly decreased healthcare spending. Stakeholders across the industry in Rhode Island have also agreed to a target annual healthcare inflation rate of 3.2 percent.

Other states and stakeholders are leveraging market forces to bring down costs.

For example, Montana used to pay multiple rates for the same services. When this was discovered, the state used its size as a self-funded employer to negotiate its costs down.

Similarly, in the commercial market, Boeing—a major employer that is also self-funded—used its size and market share to negotiate lower costs as well as risk-based payment models.

Other employers, like Walmart, redesigned their benefits and relied on Centers of Excellence to lower spending. The company zeroed in on common, costly healthcare services that displayed a broad variety in cost and patient outcome. Walmart then formed bundled payments and downside risk value-based contracts with high value providers to enforce effective spending.

As a result of developing its Center of Excellence for spine surgery and joint replacements, Walmart employees saw 14 percent less time in the hospital for spine surgery and 32 percent less time in the hospital for joint replacements. Those who received a joint replacement had 15 percent less cost than employees who went to a different provider.

Instead of size, Colorado used price transparency to reduce healthcare spending.

“Colorado is part of a small but growing consensus that it is necessary not only to review insurance premiums, a long-established oversight practice, but also to ensure the insurer-negotiated rates with hospitals are affordable for consumers,” the report stated.

However, ultimately it is unlikely that states will be able to bring down healthcare spending on their own. Experts have called for the federal government to impose more widespread transparency requirements which are impending in 2021 unless stalled due to the coronavirus, crack down on spread pricing, and other price transparency practices.

The federal government took a step in the right direction through legislation that demanded coverage for coronavirus diagnosis and treatments, including for the uninsured, the researchers indicated. This bill was passed in the beginning of the crisis and payers complied.

But the USofCare researchers argued that the entire debate over healthcare spending on the federal level has incorrectly centered on immediate relief instead of long-term change.

“The tax expenditure incentivizing ESI and access to health care being linked to employment should be more prominent in our national health care conversation; the convergence both of a deadly pandemic and historically high unemployment has pushed that debate forward,” the report found.

Instead of relying on quick fixes, the federal government should learn from state and employer responses. These stakeholders have established more concrete strategies that reform the payment system and eliminate healthcare spending waste.