By Sabrina Corlette and Karen Davenport
After a number of years of below-average will increase, premiums in employer-sponsored medical insurance are poised for fee hikes this yr. With this open enrollment season, staff will quickly know what premium will increase imply for his or her take-home pay and out-of-pocket prices, as not less than some employers move elevated prices on to their workers.
There are greater than 15 million state and native authorities workers—those that work for state govt, judicial, or legislative department companies, faculty districts, public universities and hospitals, or native municipalities—they usually too will really feel the pinch of elevated well being care prices. Yet, in some ways, the companies that buy medical insurance for these public workers are uniquely located to deal with rising well being care prices. They are sometimes the biggest industrial purchaser of well being care providers of their state and subsequently have market energy to exert strain on insurance coverage corporations and suppliers. Furthermore, given their dimension, their efforts to shift well being plan and supplier behaviors and encourage higher efficiencies can have ripple results for different industrial purchasers. For these causes, many state lawmakers have seen these well being plans as a testing floor for well being coverage improvements. The Center on Health Insurance Reforms’ (CHIR’s) latest survey of state worker well being plans (SEHPs) probed the important thing challenges going through these main well being care purchasers and recognized promising cost-control methods.
Prices Represent Primary SEHP Cost Drivers
In the CHIR’s 2023 survey, SEHP directors recognized prescription drug costs and costs for hospital providers as the first drivers of price progress. This discovering is in line with different surveys of private-sector employers. Only a couple of SEHP directors cited different components, similar to extreme or inappropriate use of well being care providers (exhibit 1). Yet, in the case of their cost-containment methods, most SEHPs prioritize curbs on enrollee use over controls on worth progress. This is probably going as a result of methods that focus on supplier costs can elicit resistance from each suppliers and plan enrollees and may be administratively difficult to implement—each sources of “friction” that plan directors search to reduce. This friction might assist clarify why, when requested to determine cost-control initiatives they’ve applied over the previous 5 years, SEHPs generally reported new illness administration and case administration applications and prior authorization necessities. These approaches can imply workers with power circumstances or acute well being care wants pay extra out of pocket or are denied protection for acceptable care.
Exhibit 1: Single highest price driver recognized in 2022 and high 5 cost-containment methods applied over the previous 5 years
Promising Strategies: Reference Pricing, Tiered Network Plans, And Multipayer Purchasing Initiatives
While nearly all of particular SEHP cost-control methods in our survey centered on lowering use of well being care providers, roughly half the states additionally indicated that they’ve taken some steps to scale back hospital and ambulatory providers costs. And though no single technique concentrating on these price drivers emerged as a transparent favourite in our survey, follow-up interviews with SEHP directors surfaced promising outcomes for reference pricing, tiered community plans, and multipayer buying initiatives.
Reference Pricing
Nine states in our survey reported pegging supplier funds to a reference worth, similar to a share of Medicare’s fee for a particular service. Such applications have garnered consideration from coverage makers because the Montana SEHP’s reference pricing initiative saved the state $47.8 million in hospital prices between state fiscal years 2017 and 2019. More not too long ago, an audit of 2021 claims information for the Oregon state well being plan’s program revealed that the state had saved greater than $112.7 million, greater than initially projected.
In interviews, two SEHP directors with comparable reference pricing applications reported realizing important financial savings with this easy-to-implement method. “We manage to save about $40 million per year,” famous an administrator in a state that units its costs primarily based on Medicare charges. The administrator additionally mirrored that though their reimbursement ranges usually are not as excessive as different industrial payers, they take pleasure in excessive supplier participation—99.3 % of hospitals and 80.0 % of physicians within the state take part of their community—which they attribute to the plan’s important dimension and market presence.
Tiered Network Plans
Tiered community plans signify one other widespread cost-control technique, with 14 SEHPs within the survey reporting that they provide a tiered community choice to their workers. Research on the associated fee impression of tiered networks in personal medical insurance plans means that using such networks may end up in modest however significant reductions in spending. For instance, one evaluation discovered that whole spending per member per quarter for enrollees in a tiered community plan fell by 5 %.
In these preparations, the well being plan divides suppliers into tiers primarily based on their efficiency in opposition to high quality measures and spending targets; workers pay decrease price sharing to see suppliers within the high efficiency tier. SEHP directors recognize the decrease prices—about 8 %, in line with one state—that tiered community plans provide in comparison with a standard broad and undifferentiated supplier community. In interviews, directors additionally famous that plan enrollees settle for tiered price sharing extra readily than a slender community that excludes high-price, however widespread, well being methods.
Multipayer Initiatives
When well being care purchasers and payers collaborate and align their buying methods, it may possibly assist overcome a market dynamic wherein consolidated, “must-have” supplier methods demand ever-higher costs for his or her providers. In our survey, solely 5 states reported that they’re collaborating with one other purchaser on cost-containment initiatives. California, New Mexico, and Washington State have coordinated with one other public purchaser, similar to Medicaid or the state-based Marketplace, whereas Colorado and Maine have labored with private-sector purchasers. Specific examples embrace a SEHP engaged on frequent requirements for well being plan efficiency with the Marketplace and Medicaid companies, one other SEHP working throughout payers to develop a brand new supply mannequin for rural hospitals within the state, and a 3rd SEHP that hopes to leverage multipurchaser alignment in worth negotiations with massive hospital methods. “If all three agencies are working together on the same things, we’re going to have an enormous impact,” predicted the SEHP administrator engaged on frequent plan efficiency requirements. This administrator additional noticed that their efforts to align throughout applications ease suppliers’ administrative and reporting burdens.
Takeaway
The progress in common household premiums in employer-sponsored insurance coverage has steadily outpaced inflation and staff’ earnings. Family premiums at the moment are virtually $24,000 per yr. Many employers have tried to shift extra of those prices onto staff and their households by larger deductibles, with the outcome that 43 % of individuals with employer-sponsored protection say it is extremely or considerably tough to afford their well being care, and greater than one-third of them battle with medical debt. At the identical time, many US employers acknowledge that well being care is an worker profit essential to recruiting and retaining a talented and productive workforce. Standing alone, nonetheless, most lack the capability and dimension to demand the fee and system adjustments essential to examine the expansion in well being care prices. State worker well being plans, nonetheless, usually have important market energy, in the event that they select to make use of it.
Our survey finds that, whereas many SEHPs proceed to concentrate on lowering well being care use, various SEHP directors are demonstrating that it’s doable to design and implement methods that cut back supplier worth inflation whereas additionally minimizing pushback from vital inner and exterior stakeholders. To the extent that a few of these methods change supplier conduct or interact different well being care purchasers, enhancements in high quality or price financial savings can have ripple results throughout the marketplace for industrial insurance coverage. As these efforts garner extra expertise and information, different SEHPs, in addition to private-sector purchasers and coverage makers, can be taught, and doubtlessly profit from, these initiatives.
This put up is a part of the ongoing Health Affairs Forefront collection, Provider Prices within the Commercial Sector, supported by Arnold Ventures.
Sabrina Corlette and Karen Davenport, “In An Era Of Premium And Provider Price Increases, State Employee Health Plans Target Key Cost Drivers,” Health Affairs Forefront, November 16, 2023, https://www.healthaffairs.org/content/forefront/era-premium-and-provider-price-increases-state-employee-health-plans-target-key-cost. Copyright © 2023 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.