Add ACOs As An Option On Employer Benefits Surveys
I’ve been reading the results of employer health benefits surveys for a long time. I remember when most surveys used the word “indemnity” to describe the type of insurance plan that let an employee go to any hospital or doctor anywhere in the country and pay the same co-pay and deductible.
Most employer health benefits surveys currently limit to four employers’ answers to the type of coverage they offer workers: PPO (preferred provider organization), POS (point of service), HMO (health maintenance organization) and HDHP (high-deductible health plan). But given the explosion in the types of insurance plans available to employers and their workers, I would ask these benefits surveyors to help out an old health care business journalist and add at least one more abbreviation to the list of possible answers: ACO (accountable care organization).
ACOs are groups of hospitals, doctors and insurers in varying combinations that agree to care for a specific population for a predetermined amount of money per patient. An ACO’s participants assume the clinical and financial risk for the medical care used by that population and share in any savings or loss from that arrangement. Employers can enroll their employees in an ACO through a health insurance carrier that offers one. Or they can contract directly with an ACO without going through a carrier.
According to the latest available figures from Leavitt Partners, a Salt Lake City, Utah-based consulting firm that tracks ACO activity, there were 284 commercial ACOs (as opposed to ACOs under contract with Medicare or Medicaid) across the country as of May 2014, insuring 12.4 million people (bit.ly/1tNLOFF).
One hotbed of commercial ACO activity is Minneapolis-St. Paul, where a number of hospitals, physician groups and insurers are dangling their ACOs in front of employers. For instance, Medica runs a private insurance exchange that sells ACO products from four health systems: Fairview Health Services, Park Nicollet Health Services, HealthEast Care System and Ridgeview Medical Center. (I moderated a panel discussion on ACOs hosted by Medica in November; Twin Cities Business was the media sponsor.) Separately, HealthPartners and Allina Health operate an ACO called the Northwest Metro Alliance.
What I don’t know is how many employers actually use an ACO to provide health benefits to workers. I’m not sure the question has ever been asked, let alone how much they cost. But given the evolving insurance market and the hype surrounding ACOs, it’s time to perform a reality check on whether ACOs are attracting any real interest from employers, and track that interest and cost over time.
Here’s why: When it comes to selecting health insurance plans to offer workers, employers will take the path of least resistance. Why change when there’s no reason to (the reason being money)? If premium increases are tolerable, why go through the hassle of changing carriers or insurance plans when you could just ratchet up employees’ share of the premium hikes and keep your added costs to a minimum.
And when premium increases become intolerable, many employers immediately will switch to high-deductible health plans for all employees without really thinking about other options. Again, it’s easier just to move workers en masse to one HDHP option rather than considering other alternative health insurance products with more complex cost-control mechanisms, like an ACO.
My hunch is, when those HDHPs stop generating savings for employers, employers then—and only then—will take a hard look at ACOs as the solution for their rising health insurance costs.
An analysis of the medical and pharmacy insurance claims from 400,000 people working at 28 companies found that, on average, just 1 percent of a company’s employees incurred 26 percent of the company’s medical costs (bit.ly/1rGncOg).
- Healthentic, the Seattle-based firm that performed the analysis, said the average annual medical expenses incurred by a high-cost employee was $113,379, compared with $2,751 each for all other employees.
- The firm defined a high-cost employee as one whose annual medical expenses were $50,000 or more.
- At some of the companies studied, high-cost employees represented as much as 41 percent of the companies’ total medical expenses in a given year.
- The top three medical conditions driving the medical expenses of high-cost employees were: cancer, chronic kidney failure and complicated births. Interventions to mitigate those three medical conditions would go a long way toward reducing an employer’s overall health care costs.
In the March 2014 column, we kicked around some ideas on how employers can take advantage of the price transparency movement in health care to lower their spending on medical care for their workers (bit.ly/1jnqEiG). One idea was putting transparency technologies in employees’ hands that would allow them to comparison shop for health care services based on price and quality. A recent study in the Journal of the American Medical Association demonstrated that doing so would lead to less spending on medical care (bit.ly/1or8gZF). In the study, 18 employers gave employees a price transparency tool to use on a voluntary basis if they needed one of three medical services: laboratory tests, advanced imaging services and physician office visits. Researchers then compared the medical claims of employees who used the tool, dubbed “searchers,” with those of employees who didn’t use the tool, dubbed “non-searchers.” Prior to the use of the technology, searchers had higher medical claims for lab tests and imaging services, and equivalent medical claims for physician office visits, as non-searchers. After the tool was available, searchers had lower medical claims than non-searchers for all three health care services.
David Burda (twitter.com/@davidrburda, email@example.com) is editorial director, health care strategies, for MSP-C, where he serves as the chief health care content strategist and health care subject matter expert.