Controlling costs in a changing health care landscape

Health care spending in Massachusetts continues to grow at a rate exceeding the rate of inflation. The Henry Kaiser Family Foundation reports that health care costs have risen moderately across the country over the past couple of years, partially because consumers are paying higher deductibles and copays and have fewer provider choices, and due to higher costs for services overall.

With more people getting access to health care and with prescription drug prices climbing, reining in the cost of health care for both employees and employers remains a challenge. Uncertainty about what will happen with the Affordable Care Act underscores the need for all employers – including municipal governments – to work toward building a multi-year, rolling strategy for controlling costs. This can be accomplished by reviewing several areas of health care expenditures, exploring innovative solutions, and implementing a proactive plan to help mitigate costs.

Educating employees
A key part of getting a handle on costs is understanding the health care pricing system and relaying this information to employees. Clearly, the system is far more complicated than just going to a doctor, getting a bill, and paying for whatever the appointment or procedure costs.

Employers must educate employees so that they can make informed choices about providers, prescription drug choices and so forth. Doing so will help them control their own costs, which in turn can help control employer costs.

One area where education can help is in how medical services and procedures are “tiered” in terms of pricing, and how these costs can vary greatly between medical facilities. Many employees may not be aware that there is a difference in cost – often significant – from one facility to another. An MRI at Massachusetts General Hospital, for example, could cost both the health plan and the patient far more than an MRI performed with the same machine at a regional medical facility.

The tiered system, which has become more common over the past several years, is based on both cost measures and quality – and can benefit both provider and patient as well as the employer sponsoring the plan. When employees understand the structure and cost differences, they are empowered to make better choices and potentially save money.

Emergency room use should also be examined. One recent study showed that more than 70 percent of ER visits could be avoided. In many non-emergency cases, going to an in-house clinic at a drug store can be a better option at a much lower cost.

Some health plans are rolling out telemedicine programs, which enable the patient to see a physician via an internet call and get a prescription if needed, without an appointment or referral, for minor and routine issues. These programs offer a convenient and lower-cost alternative, particularly when the doctor’s office is booked or the patient has a contagious condition.

Other cost factors
Employers can have a direct impact on some cost factors, but other areas are more in the hands of health plans and the health care industry.

In Massachusetts, for example, municipal health plans are allowed to make changes from year to year based on the Group Insurance Commission’s benchmark plan. So, when the GIC raises deductibles as part of its benchmark plan, other health plans may do the same. Increasing deductibles and copays are among the very few ways health plans can control premiums for employers and employees.

Managing copays can also have an impact on behavior. If an MRI requires a $100 copay, for example, an employee may be more likely to explore other options first.

Health plans are also able to mitigate costs by offering limited network plans, such as one where employees may have access to one group of physicians working within the same hospital network. MIIA piloted such a program last year in central and eastern Massachusetts and plans to expand to other areas of the state as early as July.

Limited network plans can significantly reduce costs for employee and employer because premium costs are lower. These plans are expected to become more popular and more attractive to municipal entities and employees in the near future.

Another trend that can help control spending is prescription drug cost tiering. In recent years, most health plans have offered prescription drug prices set in a three-tier system: generic (tier one), preferred brand name drugs (tier two), and non-preferred brand name and specialty drugs (tier three). Many plans are beginning to separate out specialty drugs into a fourth tier, as the price for drugs to treat conditions such as rheumatoid arthritis, hepatitis C, and Parkinson’s disease can be much more costly than the other categories. Classifying this fourth tier with a higher deductible or different pricing structure may help reduce costs for those who do not use specialty medications.

Worksite wellness
Employers can become a positive influence on employees’ overall health through worksite wellness programs. Creating a culture of health in the workplace – through a well-planned calendar of onsite programs focusing on wellness, fitness, and nutrition – is a key preventative measure.

Three keys to creating a wellness culture are setting a year-round calendar of wellness events for employees; offering a variety of programs in order to appeal to a wide range of people; and incorporating overall health, fitness, nutrition, and stress reduction into the mix.

The best wellness programs include a variety of topics and make healthy habits accessible to everyone, whether they be regular exercisers, beginner exercisers, stressed-out employees who need to improve their work-life balance, or smokers who need help quitting. In the long run, a robust employee wellness program can go a long way toward mitigating health care spending as well.

Jill Gallant-Shaw is a Senior Account Executive at MIIA.