- Payers can curb spending on medical care by investing in narrow networks and customer satisfaction tools, says a new PricewaterhouseCoopers (PwC) Health Research Institute (HRI) analysis.
PwC found that medical costs for employer-sponsored insurance are expected to maintain a stable growth rate of 6 percent in 2019. However, this still represents a year-over-year increase in actual costs as employers continue to struggle with rising medical prices, eroding productivity, and high levels of beneficiary utilization.
“Medical costs continue to grow, yet the workforce’s health and performance aren’t improving,” PwC said. “Average labor productivity growth of 1.1 percent over the last 10 years falls far below the 2.3 percent average of the last seven decades. Efforts by employers to cut utilization have mostly run their course.”
PwC found that payers may have significant agency when it comes to controlling their overall spending. The report suggests that payers focus on improving member experiences and the value of their provider networks.
Health plans with narrower, high performance networks (HPNs) can help generate cost savings by focusing on improvements in care quality and member satisfaction. HPNs allow payers to invest greater financial resources in a limited number of providers in order to maximize the effectiveness and efficiency of provider care. HPNs also hold providers accountable by measuring their performance with quality measures.
HPNs are growing in popularity as beneficiaries express interest the quality gains of health plans that use narrow networks, the team found.
The number of employers that implemented an HPN increased by 247 percent since 2014, and nearly 44 percent of beneficiaries said they are willing to have limited provider choices as long as available providers were high quality.
“Health insurers can position these plans to deliver value by giving consumers pricing transparency tools and negotiating value-based contracts such as outcomes-based payment or risk-sharing arrangements with providers and pharmaceutical and life science companies,” PwC added.
Sixty-three percent of providers said they plan for their organization to be part of a narrow network and 59 percent plan to engage in direct-to-employer contracting within five years.
Some payers have already seen success with the idea of creating contained networks of providers responsible for specific populations. For example, Blue Shield of California successfully reduced their spending trend by developing accountable care organization (ACO) contracts with providers. Over time, the payer’s spending rates fell faster among its ACO participants than among non-ACO providers.
“Historically the narrow network has been a cost play,” said Amy Yao, senior vice president and chief actuary of Blue Shield of California. “Employers are interested in bending the trend but also care about quality.”
“Our ACO products are not narrow network products—they do not target the lowest-cost providers out of the gate. Instead, we focus on those providers who have the will and skill to care for patients in a way that bends the trend.”
Payers and employers are also using health advocates to assist high deductible health plan (HDHP) members with accessing effective and affordable healthcare services.
HDHPs are a popular employer-sponsored plan offering that can contain costs by shifting greater financial responsibility to health plan members. However, that greater financial responsibility sometimes discourages HDHP members from seeking needed services in order to cut back on personal costs.
Health advocates are gaining popularity within the employer-sponsored market because they can effectively help HDHP beneficiaries to use affordable healthcare services.
Seventy-two percent of employers in 2018 offered health advocacy services. In addition, a growing number of physicians find that health advocates improve medication adherence, care efficiency, and the patient experience.
However, employers sometimes have trouble connecting patient advocates to health plan members, said Brian Marcote, President and CEO of the National Business Group on Health.
“Once [beneficiaries] are engaged, health advocacy services do a good job of helping employees understand their benefits and treatment options, navigate the health system and steer to more efficient, quality providers,” Marcote said. “But most people don’t touch the healthcare system often. When they do, they forget the health advocates are there to help.”
Employers may need to invest in new communication tools and create targeted member engagement programs to maximize the return of their health advocates, PwC said.
Despite the fact that payers can take a number of steps to control their costs, some of the factors affecting medical spending in the United States are beyond the direct control of any one organization, PwC added.
PwC identified the nation’s growing senior citizen population, unaddressed social determinants of health, large-scale provider mergers, and general inflation as pressures that will continue to challenge payers.
The rise of urgent care centers and retail clinics may also pose a problem for payers, who are likely to see short-term spikes in utilization. However, payers and employers are hopeful that utilization within these facilities will mainly consist of low-cost services that would otherwise be the responsibility of primary care providers.
“While the short-term result of increased access may be increased utilization, payers and employers hope that access will reduce costs in the long term by detecting and treating health concerns early and shifting care from higher-cost environments to those that cost less,” PwC said.
Payers have experienced success in other value-based ventures in order to lower costs, but it remains to be seen if payers can continue to mitigate other healthcare inflation and cost growth factors through VBC.