Healthcare spending: How employers can combat rising costs.

In a 2018 survey conducted by the National Alliance of Healthcare Purchaser Coalitions (National Alliance) and Benfield, 60% of employers estimated that up to 25% of their employee healthcare spending was wasted. What’s driving this waste? Both surveys suggest several reasons why, including unnecessary services, excessive administrative costs, improper use of prescription drugs, care provided in the wrong care settings, and more.

While nearly all employers agree that wasteful healthcare spending is a major problem, many of them struggle to find effective solutions. How can you strategically and proactively address healthcare waste to help reduce costs? Here are some ways:

Examine your healthcare spending data to track and understand waste

The National Alliance survey found that only 34% of employers collect data that could detect healthcare waste. To drive strategy around wasteful spending, you need to take a close look at your data. Analyze claims and billing data to identify wasteful services. Have you already established cost containment strategies? You’ll need to gather and analyze your healthcare spending data to learn if these strategies are effectively meeting your goals.

Promote education around healthcare spending

An informed employee can be an effective partner in your mission to control healthcare spending. If your employees are aware of how their actions affect costs, they may choose to act more thoughtfully.

Empower your employees through the American Board of Internal Medicine (ABIM) Foundation’s “Choosing Wisely” program. It provides informational resources on how to avoid unnecessary medical tests, treatments, and procedures. The initiative also teaches patients how to talk to their healthcare providers about tests and procedures that are right for them.

Additionally, educate your employees on the importance of making smart decisions about their healthcare. Talk to them about the different benefits and care settings, and when it’s appropriate to use each. For example, they shouldn’t head to the ER for every medical matter – only for emergencies. Make sure they identify an in-network primary care physician and encourage them to schedule regular appointments.

This leads us to the next way to proactively address healthcare waste…

Offer care advocacy

Care advocacy steers employees to the best care resulting in improved health outcomes and quality of life while reducing healthcare costs. They get assistance throughout an episode of care — from finding physicians to offering alternative treatment options. The very best of these programs utilize licensed clinicians to better serve employees’ needs.

For example, an employee may call for an orthopedic physician and a chiropractor for low back pain. However, after a care advocate listens and questions the employee, they could determine there’s another medical condition that requires a different kind of specialist. This type of advocacy ensures that the employee gets the right care of care they need the first time.

SentryHealth offers a care advocacy program that helps people find the best healthcare for the best price. Care advocacy improves outcomes and lowers costs for both employees and their employees.

Offer chronic care management programs

Another way to combat wasteful healthcare spending is by focusing on reducing the costs of caring for people with chronic diseases or conditions. Employees with chronic conditions such as diabetes, hypertension, and hyperlipidemia have poorer health, use more health services, and personally spend more on care.

90% of the United States’ $3.5 trillion in annual healthcare expenditures are for people with chronic and mental health conditions. In addition, those with chronic conditions are more likely to incur preventable hospitalizations and other poor outcomes.

Chronic conditions not only affect an employer’s healthcare spending, but also increases what an employee spends on healthcare, as they often end up paying more for copays, prescriptions, and other out-of-pocket expenses. To address the rising healthcare spending costs that go along with chronic conditions, employers should consider offering employee health programs that help those with chronic diseases better manage their conditions.

Chronic care management programs can improve the quality of life and health outcomes for many conditions including diabetes, heart failure, hypertension, COPD, and anxiety and depression. Additionally, these types of programs can help identify at-risk employees, getting them the care they need before a condition develops or worsens, which is often very expensive to treat.

Move to a self-funded plan

With a self-funded or self-insured plan, an employer assumes the financial risk for providing employee healthcare benefits. Employers pay for claims out-of-pocket as they occur instead of paying a pre-determined premium to an insurance carrier. Most large employers choose to self-insure because they are better able to control costs, tailor benefits packages, and have fewer regulatory controls. In fact, Kaiser Family Foundation reports 61% of workers are enrolled in plans that are either partially or completely self-funded.

Where does the cost savings come from with self-funded plans? For starters, they don’t include marketing costs or profit margins of traditional insurance plans. They are also exempt from state insurance regulations and premium taxes under the Employee Retirement and Income Security Act (ERISA) and are not subject to a lot of the provisions of the Affordable Care Act (ACA). Lastly, companies can customize benefits packages to address the unique needs of their workforce.

When it comes to data, self-funded employers come out on top. They have access to de-identified claims information, including prescription medications, doctor visits, and emergency room visits. By having the ability to examine information, organizations can make thoughtful, data-driven decisions about what type of healthcare programs they offer to employees.

There are other options beyond self-funding. Check out this blog post to learn more about health plan funding options.