BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
Employers struggling to contain health care costs have found little success with methods based on cost-shifting. But sources say it appears benefit designs encouraging employee consumerism and accountability are helping to slow health care cost increases.
However, while the rise in health care costs has eased in recent years, health care cost increases still outpace the consumer price index of 3% and account for almost 18% of the nation's gross domestic product.
According to the 2012 Towers Watson/National Business Group on Health annual employer survey, health care costs increased 9% in 2007, 8% in each of the next four years, and are projected to rise by 7.4% this year, before plan and contribution changes. Factoring in those changes, health care trend declined from 6% in 2007 to a projected 5.9% in 2012.
Mercer L.L.C.'s 2011 employer survey places the 2011 increase at 6.1% and projects a lesser increase of 5.7% this year.
According to the Centers for Medicare and Medicaid Services, “Total health expenditures reached $2.6 trillion in 2010, which translates to $8,402 per person or 17.9% of the nation's gross domestic product, the same share as in 2009.”
However, employers and consultants said programs encouraging employee consumerism and accountability and provider competition are holding down cost increases.
“Changes in the system have introduced more constraint on how fast health care costs increase,” said Mike Thompson, principal in PricewaterhouseCoopers L.L.P.'s global human resources services in New York. But, he added, “It's an uphill battle.”
“It would be worse if they (employers) didn't do the things they are doing,” said Helen Darling, president and CEO of the National Business Group on Health in Washington.
Sources pointed to underlying drivers that continue to push up costs.
“The first is as a nation, we're not getting any healthier,” said Tracy Watts, a partner at Mercer in Washington. Obesity is “becoming more common,” as is “the prevalence of childhood diabetes,”
Adding to that, she said, “While we're not getting any healthier, we are living longer, and that's tied to all the (expensive) innovations in health care.”
“There's not much we can do about our aging population, but the impact on health care costs of the deterioration of lifestyles can be cumulative,” agreed Mr. Thompson.
Economists have estimated that higher-priced technology has increased costs 1% to 2% per year, Mr. Thompson said. Overuse of that technology and of health care services in general “is directly related to coverage” and has been a major cost driver for years, said Ms. Darling, who formerly managed international compensation and benefits at Xerox Corp.
“Best practices are not being followed. So much care is provided that is not evidence-based,” she said, citing an example from a study by Dr. Rita Redberg, editor of the Archives of Internal Medicine, that found Medicare pays for colonoscopies for patients over age 75, for whom those screenings are not recommended.
A lot of overuse comes from self-referral to the emergency room or to specialized services, such as to orthopedics, that may not be needed or advisable, Ms. Darling said. “Not having a good relationship with a primary care physician is a prime driver of health care costs,” she said.
Ms. Darling referred to health care costs as “a crushing burden” in her chapter of the book “Engineering the System of Healthcare Delivery.”
Asurion Insurance Services in Nashville, Tenn., which provides mobile device protection, found that a major health care cost driver was overuse of the emergency room by its employees who worked from home, said Milt Ezzard, director of benefits. The company piloted a telemedicine service for those employees, which reduced the ER visits and provided a three-to-one return on investment, he said. Asurion is now rolling out the telemedicine service to all employees, he said.
The lack of transparency in provider cost and quality is a major cost driver, said Sherri Bockhorst, principal at Buck Consultants L.L.C. in St. Louis. Employees are “isolated from the cost” of services like colonoscopies and MRIs, “where there's very little difference in quality but huge differences in cost,” she said.
Charlie Salter, vp of compensation and benefits at ConAgra Foods Inc. in Omaha, Neb., and a Buck Consultants client, said that in one city the cost of an MRI of the brain ranges in price from $1,340 to $4,820. In another location, providers charge from $500 to $3,700 for a colonoscopy.
“I have more cost and quality information on purchasing a toaster than a soft organ transplant,” Mr. Salter said.
ConAgra and other large companies have begun to work with vendors such as Castlight Health Inc. and Health Care Blue Book, which provide cost information to employees, he said. Because ConAgra's consumer-directed plan, coupled with a health savings account, includes a high deductible, “our employees want to be careful with their money,” he said.
Another major cost driver is expensive wellness programs that provide incentives for employee participation rather than for outcomes. A Buck survey found that 60% of employers with wellness programs can't demonstrate their ROI, Ms. Bockhorst said. Health assessments and other components of wellness programs “of themselves don't change behaviors. We're seeing a shift to outcomes-based incentives,” that is, providing a cash incentive only if an employee reaches a certain health level threshold, she said.
ConAgra has taken that approach. “We want people to recognize their risks and begin taking the steps to get within normal limits,” Mr. Salter said. A salaried employee at ConAgra can earn up to $3,300 a year in incentives by making progress in reducing his or her health risks and maintaining good health status.
ConAgra has had a CDP for six years, and its trend has been “consistently 2% to 3% below national health care trends,” he said.
High-risk pregnancies were another major cost driver at Asurion. The company partnered with UnitedHealthcare to engage with employees and “look for signs” of trouble so the employee could be referred to a high-risk pregnancy specialist if needed. As a result, “in 2011 we had no pregnancies that hit the top-10 high claims report,” Mr. Ezzard said. Asurian had a negative medical trend in 2011, he said. “Before we were averaging 8%,” he said.
Mr. Ezzard said payers have “exhausted” cost-shifting as a strategy to hold down health care costs. “We shifted deductibles and copays, but we did not address the root cause: education on what's appropriate and efficient medical care and accountability for people making their decisions. Cost-shifting doesn't change behavior.”
Health care costs may have reached “a new normal,” Mr. Thompson said. Because of the structural changes in the health care system, “we have had a few good years. Increasingly people are wondering if we can sustain that.”