America is in the midst of a healthcare affordability crisis – and not just for the uninsured. According to the Kaiser Family Foundation, the average single deductible for health insurance in 2020 was $1,945, with the average family deductible nearing $4,000. Yet about half of the families in America have only $400 set aside to pay for emergency expenses. Beyond prohibitive deductibles, Mercer found the median out-of-pocket maximum for family coverage in a PPO plan is $7,000 in-network and $12,000 out-of-network (and it’s even higher for HDHPs and HMOs).
While workers grapple with medical debt and cost uncertainty, employers are no better off. Another Kaiser report shows a 61% rise in employer healthcare costs over the last decade. And all of this comes at a time when healthcare is critical to successful recruiting and retention, another challenge plaguing HR departments nationwide.
So, what’s standing in the way of change? Several myths and misunderstandings about employer-sponsored health plans have become conventional wisdom, deferring real change and the substantial savings possible for employers and workers alike.
Let’s bust those biases wide open with a data-driven reality check:
MYTH 1: A richer health plan comes with a higher price tag.
REALITY: Shifting from high-cost to high-value providers can reduce total cost of care by over 30%.
By building networks anchored around high-value providers and centering the member experience around primary care, there are huge savings to be had on two fronts. First, high-value providers charge lower unit costs by definition and are keenly aware of the need to maintain their low costs as a competitive advantage versus other in-market providers. Second, PCP-centricity can reduce unnecessary utilization (for example, in understanding all aspects of a patient’s care plan, a dedicated PCP can help patients avoid things like unnecessary surgery or exposure to overpriced providers).
MYTH 2: Large traditional insurance carriers get the best discounts because of their scale.
REALITY: When incentives are aligned between provider, payer and employer, companies can benefit from significantly better unit costs compared to traditional carriers.
Traditional carriers are so big that their overall leverage for driving down costs for a particular line of business can be limited. For example, Carrier A might not get too aggressive with a health system about pricing for commercial plans because that could impact their Medicare business with that system. In addition, as a for-profit company, Carrier A needs to find that profit somewhere – like long-accepted annual cost increases.
Alternatively, newer, innovative health plans can build a network of only high-value providers, cutting these providers’ competitors out of the network. These high-value providers will reduce their rates for greater exclusivity in the network. This is especially true for provider systems that have made great strides in their value-based care models but feel they are not being rewarded by big traditional legacy carriers.
MYTH 3: Employees will always choose the health plan with the broadest network.
REALITY: Nearly 75% of employees will trade off features like large networks for savings.
The conventional wisdom that health plan members will never budge on network size is simply false. The 2021 Centivo Healthcare and Financial Sacrifices Survey showed that nearly 75% of respondents were willing to trade off or forego features to save 10-30% on their health plan. Cost remains the biggest concern for consumers, so access to cost savings is often incentive enough for employees to select a narrower healthcare network, especially if it comes with higher value and a simple, affordable experience.
MYTH 4: Healthcare is “shoppable,” so arming people with price or quality comparison tools within broad networks works just as well as with narrow networks.
REALITY: Researchers found that only about one-third of healthcare is truly shoppable and less than 1% of patients used a price transparency tool to compute price differences. Simply put, patients tend to do what their doctors tell them to do.
The magic of consumerism promised patients access to all sorts of tools and other resources to help them identify the right provider in the right place at the right time. But behind the curtain, consumers find these tools difficult to make sense of in a meaningful way and few compared prices for the same service or product. Instead, patients are more likely to trust the advice of their doctors, who may make referrals with little regard to cost and quality outcomes. For example, a recent study revealed 51% of cost variation in MRIs were explicitly linked to referrals. With so much of the really expensive care not shoppable at all, employers must refocus their attention on the supply side of healthcare.
A model based in reality
Change isn’t easy, especially when we’re talking about a topic as serious as healthcare. But it can be done. By diving into the reality of what can be – balancing cost and quality through plan design, network selection and aligned incentives – you can sift through the myths and bring true change to your organization.
The Centivo 2021 Healthcare and Financial Sacrifices Survey dives into many of the beliefs that have become barriers to affordability progress. Submit your contact details below to receive a free summary of the results.
To learn more about Centivo, talk to your benefits broker or reach out at centivo.com/contact.