Featured Health Business Daily Story, Aug. 16, 2012
Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.
As large employers put the finishing touches on their health plan designs for 2013, many of them will continue to shift more costs onto employees, while others are considering defined-contribution plans to ensure more predictable health spending. However, looking ahead, many employers are considering other changes, such as switching over to products based on accountable care organizations (ACOs) and relying more on reference-based pricing as ways to both minimize cost increases and improve health outcomes for their employees, according to three employee benefits consultants who spoke at a recent AIS webinar.
Employers are going beyond fixes such as higher cost sharing and wellness programs with incentives, which have been popular over the past several years, to more innovative plans, said Todd Van Tol, a partner in Oliver Wyman’s Chicago office, during the July 31 AIS webinar titled 2013 Plan Design: What Benefit Design Changes Will Health Plans and Employers Make? “We’re now seeing [a move] to ‘productize’ ACOs and make an ACO model around a hospital-centric network,” he added.
A few health plan operators, such as Aetna Inc., recently began offering health plans that are tied to an ACO model. On July 26, the insurer said it was partnering with Wisconsin-based Aurora Health Services to offer a commercial health plan known as the Aurora Accountable Care Network, which has a price guarantee for employers (see brief, p. 6). That came on the heels of Aetna’s late-June announcement that it had teamed up with Inova Health System, a northern Virginia provider system, to launch Innovation Health Plans (HPW 7/2/12, p. 1).The insurer says it expects premiums for these new plans to be lower than the standard policies Aetna now offers in that area, due to closer care coordination that Tom Grote, president of Aetna’s Maryland, Virginia and Washington, D.C., markets contends will lead to cost savings and improved health outcomes.
Van Tol said research conducted by Oliver Wyman found that the ACO plans garner the most interest from small groups, especially those with 200 or fewer employees, partly because such companies’ employees typically are based in the same local area in which the ACO operates. He says he expects to see more ACO plans offered by health systems as more hospitals acquire physician groups.
But it might take some time before such ACO plans catch on with large employers, according to Erich Blumberg, vice president and actuary at Lockton Dunning Benefits Co., who also spoke at the webinar. The first customers for such products often are employees of the hospital spearheading the initiative, he said. Meanwhile, “all of our large-employer clients are keeping an eye on it, but it is not practical for them” at this time, he added.
The consultants agreed that reference-based pricing is growing in popularity among employers as a way to control costs. Under this type of value-based design, a plan will reimburse costs of a medical service or treatment up to a certain amount. However, if an employee selects an alternative for which charges are higher than that amount, the employee is responsible for all costs beyond the reference-based price.
“Employers are finally interested in holding people accountable above certain dollar amounts,” Blumberg commented.
While reference-based pricing has been used for some time in the pharmacy benefits world to drive consumers to use lower-cost generic drugs, that effort has been aided by price transparency, said Alexander “Sander” Domaszewicz, a principal and senior consultant at Mercer Health and Benefits’ office in Newport Beach, Calif. He added doing the same for medical procedures is likely more difficult due to a lack of transparency, and noted that the use of reference-based pricing in the insurance field is relatively new.
He suggested that a discrete procedure such as a total hip or knee replacement might be a good fit for reference-based pricing. An employer could set, say, a $30,000 cap on an uncomplicated replacement and provide employees with a list of providers that have prenegotiated that rate. Enrollees who choose to go elsewhere would pay the difference. He concedes that “change management” is an important tool in instituting such a benefit-design change to avoid pushback. But, he asserts, “if the message is that there is a handful of providers charging five or 10 times more than they should be,…all of a sudden, employee relations [issues] go way down.”
Recent research could prod interest in reference-based pricing. In February, a white paper released by Thomson Reuters found that nearly $36 billion in health care costs could be saved annually if consumers had more transparent access to pricing of procedures (HPW 3/5/12, p. 8).
© 2012 by Atlantic Information Services, Inc. All Rights Reserved.
For a recording and accompanying materials from the July 31 webinar, 2013 Plan Design: What Benefit Design Changes Will Health Plans and Employers Make?, visit the MarketPlace at www.AISHealth.com, or call (800) 521-4323.
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