Twenty of America's largest corporations recently joined together in an effort to improve the way healthcare benefits will be purchased for employees in an effort to create better healthcare outcomes. Collectively, the 20 companies are responsible for healthcare benefits for four million people and spend more than $14 billion annually on healthcare for employees, their dependents and retirees. Working together, the companies aim to break with existing marketplace practices that are costly, wasteful and inefficient, all of which have resulted in employees paying higher premiums, copayments and deductibles every year.
In coming together, the companies hope to achieve greater marketplace efficiencies so as to secure better outcomes for their employees; more knowledge about outcomes and prices by looking at the data from four million covered lives; more educated employees who will have more information with which to make smarter healthcare decisions; and a reduction of bad habits and inefficient behaviors that drive up healthcare costs without producing better healthcare results.
The challenges facing employer-sponsored care
This new approach is necessary because employer-sponsored care is facing significant challenges, including the prospect of long-term unsustainability. Costs for providing healthcare are rising, despite passage of the Affordable Care Act (ACA) in an attempt to address the issue. The regulatory climate and market factors continue to increase cost pressures on employers and employees. Since 170 million Americans get coverage via employer sponsored care, these challenges are putting that care in jeopardy, necessitating a new move for a better approach going forward.
Employers have long been aware of their cost challenges, and have looked at a variety of methods for dealing with them. These strategies have included expanded wellness plans and the expansion of high deductible "consumer driven" plans. Both strategies have their limits. The data on the cost effectiveness of wellness plans remains mixed, while there is a limit to how much workers will be willing to pay out of pocket in high deductible plans.
On the employer side, they appear to be running out of tactics for addressing healthcare costs, meaning that they must look away from the strategies already being employed to address their cost challenges.
The government isn't likely to help
Unfortunately, the government is unlikely to be able to help on this front. Beneficiaries of government health plans already cost more per covered life than those in employer-sponsored plans, in part because government tends to cover more challenging populations. In addition, government is strapped financially, taking on new burdens of more Medicaid patients and exchange subsidies as a result of the ACA, and new retiring baby boomers at the rate of 10,000 per day are creating a crunch for the Medicare program. Medicaid is already the largest aggregate item on state budgets, and the Medicare hospital trust fund is estimated to go bankrupt around the year 2030.
As a result of this combination of cost pressures and the lack of effective tools to deal with them, U.S. employers are looking for creative means to improve the health of their employees and the families of those employees, generating sustainable long term savings. For a long time, the prevailing wisdom has been that employers would continue to provide employer sponsored care indefinitely. In recent years, that thought has begun to change.
Already, analysts like former Obama aide Dr. Ezekiel Emanuel and S&P Capital Research are predicting a rapid decline in companies offering employer sponsored care over the next decade. Emanuel guesses that only about 20% of companies will be offering employer sponsored care by 2025. Unless some dynamic curtails the seemingly endless cost spiral, he may be correct.
Breaking the cost spiral
The new Alliance proves that employers are now ready to make changes to break that cost spiral. These 20 companies have committed time, resources and their data into transforming employers sponsored care. Furthermore, there is significant evidence that these 20 companies are not alone in their desire and willingness to make real changes. According to a study by the Employee Benefit Research Institute (EBRI), only 40% of employees want to continue along the same healthcare path they are on today. However, 40% also want to be able to choose their health plan and are willing to provide additional resources, above what their employer pays, if necessary. Another 20% want a lump sum payment from employers to allow them to pick their health coverage on their own. What this means is that 60% of employees are looking for some new kind of way to get affordable health coverage. And U.S. employers, as the Alliance shows, are actively seeking new options as well.
Another survey, of large employer Chief Human Resource Officers (CHROs), found that while more than 90% of employers currently run employer-managed plans, almost 60% of them want, and expect, to shift away from this model by 2020, moving towards an employer-facilitated model.
For all of these reasons, the Health Transformation Alliance is poised to bring about positive change in the way employers go about getting healthcare. The cost challenge has driven employers to recognize the need to act. The experiments of the past have shown that employers need to go further in their quest to find a better way. And the creation of the HTA shows that there is now a new model for employers to look at in the search for quality, affordable, employer-sponsored care for the 170 million Americans in their care.