Q&A with Teah Corley
As health care costs increase, employers face budgeting choices
Q: If the Affordable Care Act was intended to make health care affordable, why are employer-sponsored health plans continuing to see such significant increasing cost trends?
A: Several reasons. First, fully-insured employers are starting to see the effects of insurance companies passing along the insurance industry fees that were originally assessed to them, and it’s showing up in the form of fixed costs. Where the health care inflationary trend is projected at 6.5 percent for 2014, we are seeing as high as 5 to 6 percent in additional increases tied specifically to the insurance industry fee pass-throughs. In addition, both fully-insured and self-funded employers are starting to see increased costs on the claims side, resulting partially from meaningful-use requirements placed on health care providers by the Affordable Care Act. Health care providers have seen reduced Medicare reimbursements with increased technology requirements. They are being expected to do more with less. This results in an environment ripe for waste, fraud and abuse as health care providers struggle to keep up.
Q: As health care costs continue to rise, employers seem to be looking for ways to shift a greater portion of costs to employees. Is that a good strategy for companies that want to control plan costs?
A: Employers need to understand there is a major difference between cost shifting and cost saving. Cost shifting simply reduces employer costs temporarily while increasing employee costs. Unfortunately, that strategy doesn’t address the underlying and ongoing challenge of controlling costs for both the employer and the employee. While cost shifting provides a relatively easy, temporary fix, the best strategy is one that focuses on true long-term cost savings.
Q: What are some strategies for employers to reduce health care costs?
A: Significant opportunities to reduce costs can be found by taking the time to evaluate health care provider performance and compare provider costs. For example, the same medical procedure that costs $15,000 at one facility may cost a fraction of that amount at another facility of the same or higher quality. Not only are we seeing employers impact plan costs through creative strategies that steer employees to use verified low-cost, high-quality providers, but they’re also saving money by monitoring and closely negotiating the prescription drugs run through the medical plan. Engaging in direct contracting and negotiations on the claims side is another strategy.
Q: What should employers be preparing for now, with respect to their health plan costs in 2015?
A: Both fully-insured and self-insured employers need to prepare for the reinsurance transition fees required by the Affordable Care Act that will come due the first part of 2015 for the 2014 plan year. This is on top of the normal fixed costs and projected plan liability. This fee, which will be assessed at a rate of $63 per plan member, can be a significant cost for employers, so they need to budget for it in advance. Employers also should prepare for continued cost shifting from their providers and more monitoring and management.
PAULA BURKES, BUSINESS WRITER