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Employer Health Plans Hold the Key To Reducing Healthcare Costs

The major healthcare players have no incentive to bring costs down. Insurers, pharmacy benefit managers, and other healthcare interests profit by charging higher and higher rates. However, one entity has the scale and incentive to meaningfully lower costs: employer health plans.

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Congress is currently considering numerous promising healthcare reforms to help fix the nation’s broken healthcare system. But the best chance of meaningfully reducing astronomical healthcare costs burdening American families comes from actions that can be taken now by health plans themselves. Such private sector disruptors, not Beltway bureaucrats, have the best opportunity to make healthcare affordable.

Healthcare expenditures have increased by 50%, adjusted for inflation, over the last decade and now make up nearly one-fifth of the American economy. The financial burden on patients with rare and chronic diseases is especially heavy. About one in four American cancer patients declares bankruptcy or loses their home.

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The major healthcare players have no incentive to bring costs down. Insurers, pharmacy benefit managers, and other healthcare interests profit by charging higher and higher rates. Patients who want lower costs are powerless before this health juggernaut and will likely remain that way, even with Congressional help. However, one entity has the scale and incentive to meaningfully lower costs: employer health plans.

Employers provide health insurance for nearly 160 million Americans, and they cite rising health plan costs as one of their biggest challenges. No wonder. Average employer-sponsored family healthcare coverage is $22,500 per year, more than double the rate in 2005.

Sky-high premiums, which are generally split between employers and employees, erode business profit margins and saddle workers with big paycheck deductions. Rising premiums are also responsible for the recent proliferation of high-deductible health plans, reduced benefits, and stagnant worker wages.

Some health plans are rejecting this cost trend and reducing healthcare expenditures for their businesses and employees. They are rejecting traditional insurance arrangements and getting rid of conflicted health plan administrators who do the bidding of health insurers and big hospitals. They are hiring independent “nurse navigators” paid by employers, not through industry commissions, to identify high-value care and make direct contracts with health providers, including physicians, medical centers, and pharmacies, at cheaper rates than traditional health insurance plans.

Consider: Direct primary care doctors offer families all their primary and preventative care needs for around $100 a month. Some specialists such as obstetricians and rheumatologists are moving to a similar Netflix-style payment model. Independent surgical centers such as the Surgery Center of Oklahoma offer procedures for around half the cost of what big hospitals charge. Cash-based imaging centers such as Express MRI offer MRIs for $500, up to ten times less than what hospitals charge.

To the extent health plans can partner with such affordable providers, premiums and overall healthcare costs can begin to fall.

Take Horizon Goodwill, a charity in Hagerstown, MD, that covers 150 employees. It reduced its health plan costs by 26% by eliminating its inflationary PPO plan in favor of paying its employees’ membership fees at a direct primary care network that also offers secondary services such as labs, x-rays, and medications. Horizon also built out a friendly provider network with local hospitals and treatment facilities known as Centers of Excellence at low costs based on Medicare rates.

Midwest Carriers, a family-owned trucking company in Kaukauna, WI, with 138 covered employees, cut its health plan costs by 18%, nearly $300,000, by taking similar steps. Faulks Bros., a family-owned construction company in Waupaca, WI, with 70 covered employees, reduced its plan costs by 37%, almost $350,000, and Tenax Corporation, a construction company in Baltimore, saved more than $400,000.

There’s an additional reform that some larger employers are taking to reduce costs: hiring their own on-site physician. For instance, Allegheny Wood Products, a hardwood lumber company in Petersburg, WV, with nearly 500 covered employees, saved 15.5%, roughly $1 million, on its health plan by taking this step.

While it might sound crazy for ordinary family-owned businesses to employ doctors, desperately high healthcare costs call for desperate measures from HR leaders.

These employer health plans have passed their savings to their employees through lower deductibles and premiums. Employees are also benefitting from higher quality and more personalized care. A greater emphasis on preventative and primary care helps them identify health conditions before they become serious.

These innovative health plans are the tip of the spear to lower astronomical American healthcare costs. All businesses that offer employee health coverage should consider similar steps to enjoy similar savings and collectively help fix U.S. healthcare.

Photo: sinemaslow, Getty Images

Editor’s Note: The author does not have a financial relationship with the companies mentioned but they are all part of Health Plan Hero, a certification program for employer health plans developed by Patients Rising, a nonprofit, where the author works.

A passionate advocate for patients with cancer and other serious diseases, Terry Wilcox is Executive Director of Patients Rising, a non-profit patient education and advocacy organization that helps patients get access to essential diagnostics and the treatments they need.

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