In our 2017 National Survey of Employer –Sponsored Health Plans, we asked employers to rate the importance of strategies they will be using over the next five years to advance the triple aim of lower cost, higher quality, and a better member experience. This post on network disruption is part of a series that looks at these six key strategies.
In any given week, I spend a lot of time discussing the “D-word.” Disruption has long been the dirty word for HR professionals and their C-suite. No one wants to have to tell employees that they can no longer see their favorite doctor or hospital, or have to switch from their current brand-name drug to a generic. However, employers also cringe when they see renewal rate increases of 8-20%. And yet, when I tell them that they have to embrace disruption to lower their costs, they get stuck.
One of the disruptive strategies we recommend to employers is to change their medical plan provider network to alternative network arrangements of higher-performing providers. Taking many forms, these networks bring value to members and plan sponsors because they improve the health of patients, as well as reduce cost. Outcomes of these arrangements include reduced:
The catch is that there will be member disruption, as these networks are smaller (sometimes much smaller) than the traditional PPO network of doctors and hospitals that employees and their families are used to. Often, that’s where the conversation ends. The employer hears the “d-word” and backs away from this solution for fear of getting complaints (or even union grievances) from their members. At the risk of sounding insensitive, here’s why employers should face their fears.
Disruption can be a good thing – New healthcare delivery channels are “disrupting” the traditional approach every day, and we are loving it. Convenience care clinics, either free-standing or found in your local drug store chain, were once disruptive and are now hugely popular due to the convenience and low cost to members. Telemedicine, where patients connect with a doctor via video chat on smart phones, is a different (disruptive) approach to healthcare delivery that meets members where they are and provides an effective alternative to the emergency room for those non-life threatening health care issues that arise after hours of a traditional doctor’s office.
Traditional PPO networks are based on cost, not quality – Within a large-scale PPO, there are excellent doctors and hospitals, and there are (likely) some bad ones and everything in-between. Typically, providers are not in the network because they are better; they are there because they agreed to discounted fees. Why not steer your members to those providers who are incentivized on patient outcomes?
Network disruption sounds more scary than it actually is – Here are few ideas to keep in mind:
Disruption can save lots of money – Value based care networks can save as much as 10-15% off of PPO medical claims costs. Putting aside the member considerations for a moment, there are instances where clients could save literally millions of dollars annually by implementing an alternative network, but did not do so because it would disrupt less than 1% of members. Is it right that the plan must absorb millions of extra dollars (and pass some of those costs on to all employees via their plan contributions) in order to avoid disrupting the very small minority?
Mercer’s data shows that while national health benefit cost per employee is rising by about 3% annually, many employers – about a third – experienced cost increases of more than 10% in 2017. Small and mid-sized employers are the most likely to experience these very high annual increases – and many have are already made plan design changes, such as increasing copays or deductibles. To get at the underlying healthcare cost increases, the actual medical/Rx claims costs and utilization must be addressed.
Is it time for you to consider alternative networks or value based care arrangements? We get it, disruption is not easy -- but neither is passing on cost increases to your employees year after year. Most employers have already implemented the “easy” strategies. Now may be the time to tackle the harder ones.
More posts on Key Strategies: