In a 2018 survey conducted by the National Alliance of Healthcare Purchaser Coalitions (National Alliance) and Benfield, 60% of employers estimated that up to 25% of their employee health care spending was wasted. What’s driving this waste? Both surveys suggest several reasons why, including unnecessary services, excessive administrative costs, improper use of prescription drugs, care provided in the wrong care settings, and more.
While nearly all employers agree that wasteful health care spending is a major problem, many struggle to find effective solutions. How can you strategically and proactively address health care waste to help reduce costs? Here are some ways:
Examine your employee health care spending data to track and understand waste.
The National Alliance survey found that only 34% of employers collect data that could detect health care waste. To drive strategy around wasteful spending, you need to take a close look at your data. Analyze claims and billing data to identify wasteful services. Have you already established cost containment strategies? You’ll need to gather and analyze your health care spending data to learn if these strategies are effectively meeting your goals.
Promote education around employee health care spending.
An informed employee can be an effective partner in your mission to control health care spending. If your employees are aware of how their actions affect costs, they may choose to act more thoughtfully.
Empower your employees through the American Board of Internal Medicine (ABIM) Foundation’s “Choosing Wisely” program. It provides informational resources on how to avoid unnecessary medical tests, treatments, and procedures. The initiative also teaches patients how to talk to their health care providers about tests and procedures are right for them.
Additionally, educate your employees on the importance of making smart decisions about their health care. Talk to them about the different benefits and care settings, and when it’s appropriate to use each. For example, they shouldn’t head to the ER for every medical matter – only for emergencies. Make sure they identify an in-network primary care physician and encourage them to schedule regular appointments.
You can also encourage and support participation in employee health care programs. Many vendors like SentryHealth offer employee engagement services that facilitate enrollment in such plans. Which leads us to the next way to proactively address health care waste…
Offer chronic care management programs.
Another way to combat wasteful health care spending is by focusing on reducing costs of caring for people with chronic diseases or conditions. Employees with chronic conditions such as diabetes, hypertension, and hyperlipidemia have poorer health, use more health services, and personally spend more on care.
90% of the United States’ $3.5 trillion in annual health care expenditures are for people with chronic and mental health conditions. In addition, those with chronic conditions are more likely to incur preventable hospitalizations and other poor outcomes.
Chronic conditions not only affect an employer’s health care spending, but also increases what an employee spends on health care, as they often end up paying more for copays, prescriptions, and other out-of-pocket expenses. To address the rising health care spending costs that go along with chronic conditions, employers should consider offering employee health programs that help those with chronic diseases better manage their conditions.
Chronic care management programs can improve the quality of life and health outcomes for many conditions including diabetes, heart failure, hypertension, COPD, and anxiety and depression. Additionally, these types of programs can help identify at-risk employees, getting them the care they need before a condition develops or worsens, which is often very expensive to treat. For example, we offer chronic care management programs that reduce claims costs and improve the health and quality of life for employees. Our outcomes-focused programs drive healthy behavior change, thus reducing illness and unnecessary medical costs.
Move to a self-funded plan.
With a self-funded or self-insured plan, an employer assumes the financial risk for providing employee health care benefits. Employers pay for claims out-of-pocket as they occur instead of paying a pre-determined premium to an insurance carrier. Most large employers choose to self-insure because they are better able to control costs, tailor benefits packages, and have fewer regulatory controls. In fact, Kaiser Family Foundation reports 61% of workers are enrolled in plans that are either partially or completely self-funded.
Where does the cost savings come from with self-funded plans? For starters, they don’t include marketing costs or profit margins of traditional insurance plans. They are also exempt from state insurance regulations and premium taxes under the Employee Retirement and Income Security Act (ERISA), and are not subject to a lot of the provisions of the Affordable Care Act (ACA). Lastly, companies can customize benefits packages to address the unique needs of its workforce.
When it comes to data, self-funded employers come out on top. They have access to de-identified claims information, including prescription medications, doctor visits, and emergency room visits. By having the ability to examine information, organizations can make thoughtful, data-driven decisions about what type of health care programs they offer to employees.