February 24, 2021
Overview
The novel coronavirus (COVID-19) pandemic has been a wake-up call for business leaders about the importance of building a resilient workforce — and the key roles that new technology, flexible healthcare and financial benefits play in that process. However, pandemic-strained budgets have pushed many employers to hunt down new strategies to contain their health benefit plan costs.
“Innovations in healthcare delivery are giving employers new options to control costs and improve patient experiences,” says Wendy Smith, senior vice president and national leader of Delivery System Transformation at Aon. “Many of these ideas were already trending, and they’ve been escalated by the pandemic.”
In the U.S., the new administration and Congress promise to hasten the transformation of U.S. healthcare provision further, from a more aggressive strategy for COVID-19 recovery to an increased focus on supporting and enhancing the Affordable Care Act.
In Depth
Transformation of the way healthcare is provided and consumed is occurring at every level: individuals are taking on more potential cost burden and have more tools to use, employers are exploring emerging solutions, and healthcare providers face a changing payment and public health paradigm. Here is a look at a few trends.
The Rise of Virtual Care
One element of healthcare transformation is the rise of telemedicine and virtual care. The COVID-19 pandemic put virtual care in the spotlight by necessity. But the broad adoption of virtual options by patients, providers and insurers during the pandemic, and satisfaction with these options, means they’re earning a permanent place in the healthcare ecosystem.
Among other advantages, virtual care options allow patients to maintain relationships with providers even as their locations change, says Jim Winkler, global chief innovation officer, Global Health Solutions at Aon. For example, college students can have the same access to their family physicians while away at school as they’d have at home.
Technology can also help employers deliver better health and wellbeing programs to more workers, Winkler says. “How can we leverage virtual technology to solve some of the barriers to access?” he asks. “Can we make access to healthcare equitable whether someone is based in a city, suburbs or a more rural area?”
Winkler adds that the rapid uptake of virtual care now sees some firms contemplating “virtual directed” approaches to augment traditional health coverage. “You can’t do surgery virtually, but the model drives virtual first for primary care, for certain forms of urgent care and for behavioral health,” says Winkler.
Virtual care is proving particularly compelling in behavioral health because users can engage with it on their own terms, potentially with a combination of digital coaching and speaking in person to a care provider. “We’ve seen some good digital technology advancements in behavioral health,” says Winkler. “So virtual care will be a part of life going forward in a meaningful way, which is a really positive thing.”
A challenge here is with many boutique firms offering specialty types of care, some employers are experiencing “tech vendor exhaustion,” Winkler says, especially regarding cyber security concerns.
“The more vendors I introduce in my mix, the more contract and legal review I’ve got to do, and the more cyber security review I’ve got to do,” says Winkler. As a result, he says we might see larger vendors such as health insurers, which have demonstrated their data security capabilities and been fully vetted by employers, acquiring some of the small health technology providers to ease employers’ security concerns.
Networking, Benchmarking and Bundling to Better Control Quality and Cost
The pandemic has also accelerated the trend of employers searching for the best way to provide the most cost-efficient and high-quality healthcare benefits to employees.
One method that’s seeing increased interest is the surgical network, according to Smith. In this approach, the employer will enter into an arrangement with a network of both inpatient hospital providers and outpatient surgery centers. Through such networks, employers can obtain everything from pre-surgical to post-surgical services for one negotiated, bundled payment.
In assembling such a network, the focus isn’t just on cost but quality, Smith says. Surgeons and facilities must qualify through preliminary questionnaires to even be considered.
Reference-based pricing is another approach. Here, employers set payments to various healthcare providers based on a benchmark — for example, 140 percent of the Medicare allowable payment.
“Some employers have been particularly hard hit by the pandemic and they have a defined cost target that they’re trying to hit,” says Smith. “Reference-based pricing is one of the mechanisms that can get them there.”
The reference-based approach can be applied to inpatient or outpatient care, or from an in- or out-of-network perspective, Smith says. “It’s focusing on what’s moving the needle.”
Other employers are looking to do defined direct contracting with providers that would replace the insurer agreement in areas where most of their employee population lives. Such arrangements can not only help reduce costs, but the collaboration between employer and healthcare provider can help improve employees’ patient experience.
Because these arrangements require considerable knowledge of the local market, it might make sense for large employers to focus their direct contracting only on the areas with the largest concentrations of employees.
Improving Outcomes Through Collaboration
In some cases, employers are also looking to collaborate with other businesses on either a local or regional scale to achieve better outcomes.
Winkler says news of the end of the Haven healthcare venture among Amazon, Berkshire Hathaway and JP Morgan, shouldn’t be taken as a signal that these kinds of employer partnerships can’t work. “Healthcare is local and becoming more so,” he says, and geography is proving to be a good common denominator around which to base employer collaborations.
“Geographic-centered coalitions can come together and work directly with the local healthcare delivery system to bring change to the employers’ populations in those markets,” Winkler says, citing examples like the Pacific Business Group on Health or the Midwest Business Group on Health.
Collaborations also can mean smaller employers have influence in the healthcare space that they couldn’t achieve on their own. For example, entering a pharmacy purchasing coalition could allow an employer with a few hundred employees to obtain comparable prescription drug prices to those that a Fortune 100 company might be able to negotiate, says Winkler.
As Healthcare Transformation Accelerates, Both Employers and Employees Benefit
As the healthcare trends sparked and accelerated by the pandemic continue, employers and their employees stand to benefit.
“When the employer has a flat or a negative trend in their health benefit costs, then they’re able to make some adjustments to their benefit offerings,” Smith says. “It might be a reduction in the copayments to change the coinsurance threshold. The downstream benefit is always to the employee because they’re seeing relief on the total cost of care.”
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