The 2014 Kaiser/HRET Employer Health Benefits Survey came out last week, with the remarkable news that employers are reining in health costs. Premiums for employer-based health insurance are up an average of just 3% this year, relatively little considering the steep increases from the first decade of the century, when health costs more than doubled.
The key to this achievement: employers’ widespread adoption of high-deductible health plans. The phenomenon is an unintended consequence of Obamacare and an intended consequence of “Bushcare,” as I’ve described before.
The Kaiser/HRET study confirms the prevalence of these high deductible plans; one in five workers is now enrolled, and deductible levels continue to rise. These plans have an average deductible of more than $2,200 for an individual and $4,300 for family coverage. And unlike more traditional plans, until the employee hits his or her deductible, they pay everything—office visits, X-rays and tests that other plans simply charge a copay for.
The Twist: It’s Not All About Controlling Costs
But here’s a surprising twist: Employers may be cost-conscious, but they are still spending more money.
The same report shows that employers are spending more than they did last year on their portion of the premiums. Moreover, they are voluntarily spending additional sums of money above and beyond what they pay in health insurance premiums. Here are some examples.
First, about two-thirds of the large employers that offer high-deductible plans voluntarily pair them with tax-protected health savings accounts that help employees pay out-of-pocket costs. Many of these employers pay into these accounts, again voluntarily, as much as $3,000 a year for a single-family savings account.
Many are also paying to exclude some benefits from the deductible requirements, such as preventive care, prescription medications or physician services for diabetics. What are we to make of this? Employers’ first consideration is not cost, but value. Employers are giving employees incentives to shop for the right care at the right price, without sacrificing necessary care when money is tight. It’s a tough balance, but employers appear to be grappling with it very seriously, and it’s costing them.
Investing In Wellness (Wisely)
Another dramatic example is employers’ investment in wellness and disease management programs. Such programs are not cheap, and the research suggests employers don’t see a financial return on that investment. Yet it is worthwhile to them anyway, and hard-nosed leading CEOs take pride in these programs. Virtually all large employers in the Kaiser/HRET study report some kind of wellness or disease management program such as smoking cessation classes, exercise programs, and health coaching.
But this rapid escalation in employer investment has spawned a “Wild West” kind of market for wellness and disease management, with thousands of vendors overwhelming employers, often touting exaggerated claims of effectiveness.
Frustrated by this, two leading employers have stepped forward as the new sheriffs in town: Intel Intel and GE. The two companies just launched the Validation Institute, to subject these vendors to “the highest standards of validity, allowing them to compete on the basis of integrity and performance.” (They will also validate nonprofit ventures that don’t sell anything, as they did for my organization’s Calculator of the hidden surcharge Americans pay for hospital errors, a free tool for employers).
Not only will the Validation Institute publish the names of products or services they review and deem valid, the Institute will indemnify those successfully validated enterprises for up to $20,000. Companies can pay the Institute to review them for potential validation, or the Institute will simply publish for free the name of any company that supplies documentation that another credible organization has validated and indemnified them.
I’ve been told the Validation Institute has already uncovered eyebrow-raising claims from some popular vendors, like the vendor that claims to save more than an employer spends in health benefits. Employers are already bookmarking the Validation Institute site to “check the wellness math.”
Thoughtful Spending Is The Game Plan For Employers
These are truly interesting times for employers and employees navigating health care. Employers are intent on controlling health costs and, for the first time, succeeding in doing so. But they are also intent on contributing to their employees’ good health, and willing to spend more money if it accomplishes that goal. The trend we are seeing is not one of merciless cost-cutting, but compassionate and thoughtful spending. Employers are beginning to treat health benefits the way they treat any other service they purchase: Get the right care for the right price, and hold providers accountable.