The cost management challenge
Most US employers offer health insurance to their employees for two major reasons – it is the right thing to do since employers care about their employees and equally important because the employers compete for talent and the ability to obtain good health insurance is a prime concern for any job seeker. Unfortunately, the rising health care costs that always outpace inflation continue to be a vexing problem for most US employers. Besides the issue of direct health care costs, employers also face ongoing challenges while guiding employees at open-enrollment through the remainder of the year with issues pertaining to benefits, unpaid claims, incurred costs and badly adjudicated claims.
The past 60 years have seen a few macroeconomic cycles vis-à-vis health care cost management with each change lasting about 20 years. In the 1960’s, PPO plans made their debut. In the early 1980’s, faced with skyrocketing costs of PPO plans, employers began to adopt HMOs. Towards the end of the 1990’s, when the clamor for cost control was reignited, employers made a move towards ‘self-insurance’. Over the course of the last 5-7 years, the next frontier for cost management appears to be consumer-directed health plans or CDHPs.
While few employers have adopted full CDHP replacement, many continue to offer multiple plan choices to stay competitive, and allowing employees to choose a plan in their best interest. Employers often spend significantly on educating their employees about CDHPs in the hope that employees will proactively choose them and participate in helping manage costs. But most often the results do not pan out.
What are the underlying issues?
The reasons for these poor outcomes are simple. Healthcare happens to be one of the most non-transparent sectors especially when it comes to the economics of healthcare. Next, there are inherent complexities in plan designs and the number of factors to consider is vast. Then there are the jargon and insurance terms that are not easily understood – embedded deductible, aggregate out of pocket, co-insurance, co-pay etc. Employer attempts at communication and outreach to explain and educate around these topics are often met with low employee engagement. In addition, we live in a world where facts and fiction can often comingle and it is very easy for employees to misinterpret CDHPs as a curtailment of benefit.
What is the solution?
One way to solve this problem is to offer a solution that combines education and easy to understand personalized econometric details with the ability to easily test the authenticity of the solution as a trusted source of advice. Very importantly the solution must also tackle emotional consumer questions such as:
- “If I switch health plans can I keep my doctor?”
- “If I switch health plans will my medicines still be covered?”
- “Can you help me understand my bills and help me control my costs over the next 12 months?”
- “Am I due for any screening tests and can you help alert me to any ‘gaps in care’?”
- “Can you remind me to keep refilling my medicines?”
- “Can you alert me via email or text message about possible drug or condition interactions”.
Obeo Health offers exactly this kind of a solution. It is a big data predictive analytics platform that produces quick results for a user by mining multiple datasets. These data streams include the following; past healthcare claims, provider network status, medication formularies, procedure & medication pricing and plan design data. In particular, Obeo currently offers three modules:
- Plan Navigator – Employees can budget annual healthcare costs and select the best Health Plan based on their past medical claims data and predictive future personal health Educational content is provided via text and multiple video clips.
- Health Organizer – Employees can track and manage their healthcare spend and wellbeing throughout the year. They will receive financial and clinical alerts via email or text message.. They can also view their claims in an easy to understand fashion.
- Population Health Manager – Employers can analyze their aggregated healthcare trends to build smarter plans and improve employee wellbeing.
Cost reduction and satisfied employees – yes, it’s possible!
Since the economic interests of the employers are often directly related to employee decisions, the Obeo solution also results in big savings for the employers. Here are some common ways in which Obeo enables employer savings:
- Significant proactive migration of employees to CDHP plans – in a single year as high as 25-40%.
- Steering employees to employer promoted programs such as telemedicine and EAP
- Helping employees understand the implications of going to a high-cost ER facility when less expensive options such as Urgent Care are available.
- Educating employees about visiting standalone imaging centers and labs as opposed to getting those procedures done in a hospital setting and many more.
The 2016 Employer Health Benefits Survey from the Kaiser family foundation mentioned savings of as much as $1,000 per employee per year from CDHP adoption. Health insurance companies in the past have quoted savings of 10-14%. Benefits consulting companies such as Mercer have quoted savings of up to 22% as depicted in the figure below in their 2016 National Survey of Employer-Sponsored Health Plans. No matter which number you choose, the savings via CDHP adoption are big.
One Obeo client – a 1,200 employee high tech company located in Atlanta that now has almost a 72% proactive adoption of CDHP plans has seen and confirmed savings of about $1400 per employee per year across the population that opted into the CDHP plan.
A second Obeo client – a 7000 employee Indian IT services company has seen savings of $3M+ after they ended with almost a 35% increase in their CDHP adoption.
A third Obeo client – a division of a fortune 50 company with about 4,000 employees has seen savings of $2M+ after the use of Obeo.
The graphs below show the aggregated spend trend for another Obeo client in the first 10 months of 2017 as compared to similar periods in 2014-2016.
The following graph displays a decline of 15.2% in plan costs in first 11 months of 2017 as compared to the increases in each of the previous years for the same period. This is significant especially in the face of an almost 10% increase in the total employee population for this employer. The 17.5% increase in employee spend over the same period is largely due to the increase in the employee population. The final per employee increase is minimal when the impact of tax savings accounts (HSA, HRA etc) is considered. The bottom line is an overall cost decrease in both employer and majority employee populations.
The graph below displays total spend for the same period for the same employer when IBNR is factored into spend computations. The savings in the total spend in 2017 is still a spectacular 10%.
Obeo Health can help you achieve similar results. Give your employees the tools to navigate the healthcare maze. Win the hearts and minds of your employees and achieve significant savings at the same time. Contact us at firstname.lastname@example.org.