In 2022, challenges will continue to mount for plan sponsors and their advisors as they battle to keep costs under control without gutting benefits.
“The top cost drivers for 2022 are similar to those of 2021, with musculoskeletal conditions and cancer ranking number one and two, respectively, followed by diabetes, cardiovascular and high-risk maternity,” says Ellen Kelsay, president and CEO of Business Group on Health. “Prescription drug costs continue to accelerate at an alarming rate, specifically costs associated with specialty medications.”
HR consultancy Mercer pegs the premium increase figure at 4.7% for 2022, based on 1,502 employer responses. But what about the cost of benefits apart from the annual premium bump?
The equation must now factor in such recently emerging elements as the coronavirus, and the exploding investor buyouts of health systems and physician practices. Given the extreme pressure on employers to retain and recruit in the tightest job market in memory, benefits represent an essential part of the retain/recruit strategy. How rich does a plan need to be to secure today’s top performer?
To list all the factors that will lead to a plan’s ultimate cost would be a Sisyphean task. They are both numerous and ever-changing and include pharmacy costs (always an enigma in the age of specialty drugs), lack of contract transparency, health systems’ random pricing policies, hidden broker fees, etc.
We called out five major drivers of a plan’s cost in 2022, with recommendations for mitigating those costs.
The COVID factor
“Many employers expect to see an increase in preventive screenings and elective surgeries that may have been delayed or postponed due to the pandemic,” Kelsay notes. It also discouraged members from getting their regular primary care checkups. This included lots of people with chronic conditions who disrupted their care schedules. Plan sponsors will pay the price for these (understandable) consumer responses to the pandemic in the next several plan cycles.
Assuming the glut of virus-infected hospital and clinic patients subsides this year, we’ll see a rush to make up for those delays. The surgeries that are covered by the plan will lead to a spike in utilization. The delayed primary care will result in later-stage disease diagnoses that will be more costly to treat. Those with chronic conditions will require more aggressive measures to manage their health.
Then there are the diseases – both physical and mental – attributable primarily to COVID, the cost of which will be borne to some degree by plan sponsors. “Additional areas employers are keeping a watchful eye on include late-stage cancer diagnoses (due to missed preventive screenings) and the impact of long COVID,” Kelsay adds.
Physicians are reporting much higher levels of liver disorders and drug-use-related conditions brought on by the anxiety created by the pandemic. Cigarette smoking spiked in the past two years. Alarmingly, reports Leia Spoor, senior clinical consultant at consulting firm Holmes Murphy, “Mental health status has deteriorated during the pandemic. The rates of stress, anxiety and depression have remained significantly higher than pre-COVID-19 levels across demographic groups. Some 38% of adults have reported symptoms of anxiety disorder or depressive disorder in the current environment, an increase of 27% since 2019.”
Mitigation: Employers can take specific actions to address individual cost centers, such as adding services to support those with chronic diseases so they take their medications as prescribed. Holmes Murphy and others recommend that employers add low- or no-copay mental health counseling to plans. To prepare for a glut of surgeries, identify centers of excellence and offer incentives to use them. Make sure employees know basic primary care is free of charge to them.
Telehealth to the rescue
The number of experts and research reports touting the unleashed power of telehealth during the pandemic leads us to carve out its own “cost factor” section this year. Telehealth is more than a mitigating factor to the costs of COVID: It truly has the potential to be a plan design and utilization game changer.
“Employers are leveraging virtual health solutions to address any access barriers towards seeking care,” says Kelsay. “Virtual health solutions for primary care, mental health, musculoskeletal, family planning and many chronic conditions are now prevalent in employer plan offerings.”
There are clearly costs associated with telehealth integration into the plan. You have to find the vendors that offer the desired services. You have to educate plan members on the value of telehealth – and on when, and when not, to use it. Reimbursement policies have yet to be codified, so there could be early telehealth billing surprises.
Mitigation: The benefits of fully integrating telehealth into your plan far outweigh any costs associated with it, all agree. The Business Group on Health found that 76% of employers responding to a survey in 2020 said they modified plans to allow increased access to telehealth and virtual care. More than half said they intend to further integrate digital and virtual health into their benefits packages, including adding concierge and navigation services. The true savings telehealth can drive may be a year or three away. But, by integrating more telehealth options into plan design, employers will see a reduction in claims and, hopefully, increased utilization of existing benefits.
Telehealth can immediately offset trips to the ER or urgent care, says a recent PwC study: “Integrating telehealth, urgent care and other visits used in place of ED visits back into primary care will be important to lowering spending and improving members’ health. … Payers can tap the full potential of CRM tools to identify the points in a patient journey where outreach or interventions could result in better care for chronic conditions, and coordinate with providers on needed outreach or interventions.”
The shrinking independent provider system
COVID stretched many health systems and physician practices beyond their abilities to achieve financial stability. An untold number of physician practices and specialty clinics simply vanished. Thousands of others sold themselves to the highest bidder, either the local health system or an investor group. Independent health systems sought exit strategies through investment firm buyouts. In all cases, independently owned entities were swallowed up by bigger fish – fish whose primary concern may or may not be quality of care.
This consolidation will hit plan sponsors hard in several significant ways. Plan sponsors have been advised to seek centers of excellence; to push for contractual and medical outcomes transparency with providers; to strike volume deals with local providers. But so far, evidence suggests that entities owned by remotely situated investment groups don’t have the flexibility to do any of those things. They are now part of a national health care conglomerate where guidelines for pricing and outsourcing of procedures, tests and assessments are dictated according to what best suits the ownership team.
Allison De Paoli, founder of Altiqe Consulting, says the private equity firms “will make it work for them, but it won’t often work for doctors, patients or employers. Typically, the new acquired facility will need to use the “preferred” lab, imaging, Rx vendors, refer to specific physicians or physician groups. Patient-centric or quality of care can get lost there.”
Meanwhile, closed primary care practices are pushing patients to get care at the ER or urgent care – hardly the ideal situation, says Alex Lickerman, M.D, founder and chief medical officer, ImagineMD: “Even more people have been going to expensive specialists and getting their primary care in ERs, where, due to the lack of a pre-existing relationship between patient and doctor and a lack of thorough knowledge of patients’ histories, the epidemic of unnecessary testing has continued.”
Mitigation: Federal antitrust and anti-competitive practices enforcement would help – but don’t hold your breath. Meantime, design advisors point to an array of available alternatives.
“Employers are seeking value-based arrangements – traditionally seen in centers of excellence, high-performance networks and accountable care organizations – are now expanding into virtual health payment models as well,” Kelsay says. “These value-based arrangements incent quality, outcomes and experience – not volume.”
The list of options goes on, including direct primary care; narrow networks that incentivize members to choose higher-quality service providers; onsite or near-site clinics under contract for services; and concierge options. All can lead to better health outcomes and cost savings.
“You can help providers – doctors, imaging facilities, inpatient or outpatient facilities – stay independent by contracting with them directly or using one of the service providers that has already done this. These practices help them to be independent and profitable,” DePaoli says.
Lickerman calls on plan sponsors to “improve reimbursement for primary care so individual primary care docs can see fewer patients and improve access for those they see.”
Talent war threatens benefits gains
Here’s another plan cost factor that wasn’t even in the Top 5 five years ago. But the disappearing-worker phenomenon has lent true urgency to retain/recruit. No industry is immune to this shortage of candidates. Result: Offer better benefits and health coverage, don’t play around with basic plan design, and damn the cost. Employers that once challenged annual plan increases are fearful of questioning them.
“The talent war has employers hesitant to resist market inflation forces,” says Holmes Murphy’s Leia Spoor. “2021 was more volatile than expected, and it appears the level of volatility will only increase in 2022. A massive war for talent and the highest inflation levels in a generation are leading some companies to find alternatives to increasing compensation.” It is also undermining employer resolve to experiment with progressive benefits packages.
Mitigation: This is a tough one. Spoor of Holmes Murphy suggests offering an array of alternatives to increasing the overall compensation package, such as a shorter workweek and “targeted investments for specific segments of their workforce.” Signing bonuses and generous annual bonuses to top talent could protect gains made in plan design and negotiated rates, etc. Consider adding more elected (voluntary) benefits to sweeten the plan. Is it really worth sacrificing progress in one area to meet short-term objectives in another? Do the math.
Bob, Sally, LaToya, Jose: The individual cost center
Full disclosure: Nurse Deb Ault of Ault International Medical Management convinced us to create this cost category. Her argument is persuasive: The human beings covered by the plan represent the largest cost factor, year in and year out, that most companies don’t pay any attention to. Employers can take all sorts of one-time actions to better control plan cost. But unless those covered by the plan are getting the health care when they need it, where they need it, and from quality providers with transparent billing practices, she says, the plan sponsor still has no true control over the spend.
As Ault states: “Anyone [covered by your plan] who does not have a true patient advocate with specialized expertise at marrying together both the clinical and the financial aspects of care, and anyone who does not have access to the plethora of quality/cost transparency tools that have hit the market in the last few years, those people are going to be the biggest drivers of employer health care costs in 2022. … It’s the people who matter, and who deserve individualized help and attention. And if you do that, then you don’t have to worry (as much) about costs.”
Mitigation: Ault recommends engaging a consultant (not necessarily a broker) versed in medical management. “The consultant will bring a vendor partner to the table to work directly with patients at point of sickness,” she says. This health system navigator will be available to plan members to help them make the best choices possible when they engage in health care. Especially for companies with 500 lives or fewer, a few needlessly costly individual health care choices can cause claims to spike. Plan members don’t know everything available to them in the benefits package. They don’t know how to identify quality providers, and they get frustrated when they do try to advocate for themselves in the jungle we call health care. They need guidance. Guidance reduces claims.
“Helping human beings at the point of sickness is where the long-term savings are. At the end of the day, the most important question is this: When a human being got sick, what did you do to help them? If that’s not where you’re focused, nothing else matters.”https://www.benefitspro.com/2022/02/28/5-factors-that-can-make-or-break-health-care-spending-in-2022/