We’ve covered the fact that large companies are beginning to contract directly with health care providers, totally bypassing health insurers. I’ve said it before -- send health insurance on a one-year vacation nationwide and our health care problem would immediately be fixed because providers would have to work directly with patients as payers. The gig would be up. Opaque health care would immediately have to become transparent, accountable and affordable – or providers would go out of business. They are, after all, businesses, too, which the mess we’ve all contributed to that we call our current U.S. health care system makes us forget. These direct contracts large employers are negotiating are effectively achieving the same thing. Health insurance was never meant to be a way for providers and pharmaceuticals to hide. It was never meant to become arbitrators of how providers practice medicine either. It was initially meant to simply be a more convenient way to pay for health care.
I don’t see the health insurance on vacation scenario happening, but what about smaller companies? Could they also make an impact by forming alliances to directly contract with providers as well?
Well, with shifting out-of-control health care costs to employees reaching its tipping point, confronting the true underlying causes of health care expenditures -- high prices and health care inefficiencies – may be employers of all sizes only remaining option.
A recent article in the Harvard Business Review states it this way: “To address these challenges, they will have to band together in purchasing coalitions that give them the local market power to force health systems to reform.” Exactly.
High Deductible Health Plans were a bust – employers found out the hard way that employees just don’t have $6,000 to $12,000 lying around, so they’ve been choosing to just not seek health care, which defeats the purpose and actually ends up increasing employers’ costs covering sicker employees, since they don’t go until their health issues become emergencies. In the article, they point out that the percent of U.S. workers who are underinsured, facing out-of-pocket health care expenses greater than 10% of their income excluding premiums, increased from 10% in 2003 to 24% in 2016. Between 2011 and 2017, employees’ premiums and deductibles grew faster than their median income. Employers need to negotiate prices, transparency, accountability, and remake our health care system while they’re at it.
One challenge is that all health care is local so success in negotiating affordability and reforming health care delivery depend on an employer’s ability to force price concessions and behavior change from local physicians and health care institutions. Attempting that one employer at a time makes it difficult to muster enough purchasing power leverage to succeed.
When you think about it, this is even true for large national companies whose aggregate workforce is spread across tens or hundreds of localities. In addition to the fact that these employers may have little else in common, actually forming purchasing coalitions are further thwarted by antitrust laws that limit employers’ ability to collaborate. Add to this the fact that health care consolidations – 90% of metropolitan areas have highly concentrated hospital markets and 65% have highly concentrated specialist physician markets – also work to employers’ disadvantage.
A second challenge is the steep learning curve in deciphering health care purchasing. While some of the behemoth corporations have the funds and motivation to hire sophisticated health benefits specialists, 7 to 8 million mid-size and small employers are just trying to keep their noses above water managing their core business in a roller coaster economy.
A third challenge is convincing employees to change their providers. Getting between employees and their doctors in a tight labor market is not smart.
See what I mean by we all the made this mess – we all need to fix it?
While the Harvard Business Review article resorts to bringing back in health insurers and government, I believe they are bypassing the most powerful piece of this health care fix puzzle – the employees who are also the consumers and the patients in all of this. In a perfect world, employees would demand transparency, accountability and affordability from their providers, even if their employer plan is paying for it.
Now that is a different target for employers, but why not? Maybe employers need to team up with their employees, incentivizing and engaging their employees in being part of the health care cost and quality solution. Perhaps employers need to be more transparent with their employees about the effect health care costs are having on the company’s bottom line and sustainability. How about transparency on how partnering to force health care costs down and quality up could translate to higher employee compensation? That is plausible, right? Could employers commit health care plan savings to employee compensation? Hmmm….
Source: David Blumenthal, Lovisa Gustafsson and Shawn Bishop. 11/2/2018. “To Control Health Care Costs, U.S. Employers Should Form Purchasing Alliances.” Harvard Business Review. Retrieved 11/8/18 from: https://hbr.org/2018/11/to-control-health-care-costs-u-s-employers-should-form-purchasing-alliances?utm_medium=social&utm_source=twitter&utm_campaign=hbr
Rylan Klaseen & Associates
Rylan Klaseen & Associates
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