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Employers switch to high-deductible plans and private exchanges to cut costs

Employers switch to high-deductible plans and private exchanges to cut costs

Benefit managers who are looking to control rising health care costs have converging trends that can aid them in that effort.

Adopting high-deductible health plans, revising plan designs and moving coverage to private health care exchanges are among ways companies and organizations are trying to contain their costs. Adopting a comprehensive benefits strategy, analyzing claims data and instituting reference-based pricing also aid those cost-containment efforts, experts say.

Ed Kaplan, New York-based senior vice president and national health practice leader at consultant The Segal Group Inc., said a combination approach is needed because the drivers of health care costs can vary from year to year.

“The most effective clients we have are the ones that take an "all of the above' approach to containing costs,” Mr. Kaplan said.

Chris Riedl, Chicago-based head of product strategy for national accounts at Aetna Inc., said the cost savings companies can accrue after shifting employees to a high-deductible health plan, also known as a consumer-driven health plan, is evident in the health insurer's annual study.

Tim Nimmer, Denver-based chief health care actuary at Aon Hewitt, said more comprehensive claims data also is helping improve plan design.

According to an Aetna study based on nearly 10 years of Aetna data, firms using consumer-driven health plans saved $208 per member per year, which would equal $12.5 million over a six-year period for a plan with 10,000 members.


“From the data that we have seen, CDHP plans have proven their ability to deliver cost savings” for employers, Ms. Riedl said.

Nonetheless, Ms. Riedl said a full replacement plan, in which an employer offers only a high-deductible plan, is not the only way companies can save money. The study found that companies following a series of best practices that include year-round employee communications, incentives for healthy behaviors, and a combination of wellness and case management programs also can reduce costs.

“What we found is that even if you do not go full replacement with a consumer-directed plan — but do implement a comprehensive benefits strategy — you can still see improved results,” Ms. Riedl said.

Bruce Elliott, Washington-based manager of compensation and benefits at the Society for Human Resource Management, said analyzing claims data is another way to control health costs.

For example, companies concerned about prescription drug costs can adopt low-cost wellness and disease management programs to help eliminate the need for expensive drugs.

“Claims data is now much more granular,” Mr. Elliott said. “So a fair bit of financial analysis can go a long way to finding out instances where you can contain costs in your medical plan.”


When it comes to plan design, Mr. Nimmer said data analysis is essential.

He said an analysis for an unnamed client by Aon Hewitt showed a wide divergence in the cost of knee-replacement surgery in California, with a range of $3,000 to $90,000 per procedure. The data showed 80% of the procedures could be performed for $10,000 or less, so the client changed its plan design to provide at most $10,000 in reimbursement for a knee replacement rather than covering the procedure irrespective of cost, Mr. Nimmer said.

The move to “reference-based” pricing also requires online tools that arm the employee with the information on “who charges what” to enable them to make the best decision on which provider to choose for the knee replacement, he said.

“These transparency-type tools are growing in popularity,” Mr. Nimmer said. “They encourage you to modify your behavior without necessarily taking anything away from you as an employee.”

Greater employee choice and involvement also dovetail with the growth of private health insurance exchanges.

Mr. Elliott said many benefits managers are keeping an eye on the experience of early adopters of private health insurance exchanges.

“It will be interesting to see what their behaviors are over the next few years,” Mr. Elliott said. “We are probably going to see larger organizations adopt private exchanges as one means of cost containment. Provided that they are successful, we will see products intended for the mid- and small-sized market emerge as well.”

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