Health care spending in 2019 reached $3.8 trillion, 17.7 percent of the gross domestic product in the United States.
Likewise, employer-sponsored health insurance premiums — which cover about 157 million people — have increased 55 percent since 2010, according to the Kaiser Family Foundation. In the last decade, total family premiums grew to an average $21,342 from $13,700, and employer contributions to those plans skyrocketed 61 percent to an average $15,754 from $9,773.
Cost projections only point upward. According to federal national health expenditure data, annual health care spending could reach $6.2 trillion, or 19.7 percent of GDP, by 2028, putting even more financial pressure on employers.
The solution to this problem, said Dominick Pallone, CEO of Michigan Association of Health Plans, is a strong partnership between employers and their health providers because “managed care plans are uniquely centered at the nexus of health care to help employers lower their costs and produce the best access to and quality of care for their employees.”
HEALTH CARE COSTS IMPACT BOTH EXPENSES AND PRODUCTIVITY
If employers really examine their bottom lines, they will discover that in addition to the industry they operate in, they are also in the health care business by virtue of how much they spend on health care benefits for employees and their dependents, explained Bret Jackson, president of the Economic Alliance of Michigan, which advocates for companies that provide employer-sponsored health insurance and their patients.
Research shows that a majority of health care expenditures are attributable to a small number of people, many of whom are dealing with chronic diseases.
“Fifty percent of people only have about 3 percent of health care expenditures, because most people aren’t sick,” said Laura Appel, senior vice president of Health Policy & Innovation for the Michigan Health and Hospital Association. However, 5 percent of people who use their insurance spend almost 50 percent of the outlay for health care, and 10 percent of families have 50 percent of the expenses, she said.
According to the Centers for Disease Control and Prevention, that’s because mental health conditions and chronic diseases, such as heart disease, stroke, diabetes and cancer, account for 90 percent of total health-care spending.
For example, the CDC reports, heart disease and stroke alone cost the health care system more than $200 billion annually and result in $138 billion in lost job productivity each year. And arthritis, which is the leading cause of work disabilities, accounts for more than $164 billion in indirect lost earnings each year.
“It is imperative then for employers to become informed consumers of the health care products they’re investing so much money into,” Jackson said.
TRENDS AND CHALLENGES IN MANAGED CARE
The path to delivering affordable quality care is complicated, however, because providers and pharmaceutical companies are often out of sync with managed care goals. Dr. Michael Genord, executive vice president of Henry Ford Health System and president and CEO of Health Alliance Plan, noted that some of the biggest obstacles in reducing costs without compromising quality of care are centered around the process of prior authorization, a tool that is designed to help caregivers choose the optimum solution for patients while also holding physicians accountable for best practices.
Studies show a significant percentage of health care in the United States and other countries is unindicated or overused, including services in clinical settings that don’t necessarily benefit patients and may cause harm by complicating access to healthcare. According to Genord, “It’s low-value care. It’s over testing and over imaging,” Genord said.
It is difficult to address issues around low-value care without a true partnership between providers and managed care plans. According to Genord, practical and meaningful communication with physicians is crucial to ensure they are using the most efficacious drug at the lowest cost. In turn, managed care plans must align incentives and decrease administrative burdens on providers to share the overall public cost of the patients they treat, Genord said. “Our goal is to remind physicians about best practices in high-value care… which will lead to highest quality care, which will lead to lower costs. But they put up barriers and fight us on those efforts.”
ABOUT THIS ROUNDTABLE
MAHP, in partnership with Crain’s Content Studio, recently convened a group of industry experts for a virtual roundtable to discuss how managed care plans help employers manage high-risk populations of employees, lower the costs of their sponsored health plans, address rising prescription drug costs, and the obstacles and trends in increasing healthcare costs.
“The pharmaceutical industry and the provider groups are trying to find ways to undermine the tools that are out there that managed care can use,” said Bret Jackson. “Many providers do wasteful tests (and have) shotgun approaches to curing disease. But having managed care plans help guide the patient through those experiences is what provides the value to employers.”
A crucial step in eliminating the gap between providers and payers requires integrating care through data sharing, said Megan Schmidt, senior vice president of Employer Solutions for Priority Health.
“We worked on things like bridging our electronic medical records and real-time pharmacy benefits, so you don’t have to go to our website and look at our pharmacy and our formulary provider. We’re going to embed that right in your EMR [electronic medical record], so there isn’t a friction point of somebody leaving their physician’s office, getting to the pharmacy, and learning a prescription is not covered,” Schmidt said. “This transparent relationship becomes very important in working towards value.”
Ultimately, emphasizing to providers that patient outcomes represent value is essential, Appel said. “We have value when the outcomes that matter to patients are what we’re meeting.”
Integration is crucial to the delivery of timely, value-based health care.
MANAGED CARE CAN LOWER OVERALL COSTS OF EMPLOYER-SPONSORED HEALTH CARE
About 30.8 million people in the U.S. had at least three chronic diseases in 2015, which indirectly — think lost productivity — costs an estimated $8,000 a person. That number will likely surge to 83.4 million people by 2030, according to the Milken Institute.
If employers measure the cost productivity in terms of absenteeism, presenteeism and what employees are or are not able to accomplish on their jobs due to health issues, those costs probably outstrip what they pay in health care.
“In our tight labor market right now, we need all the productivity we can get. If something were happening to hinder your manufacturing line, you wouldn’t hesitate to do something differently for that area. If you have a segment of employees having problems, you can troubleshoot and do something differently,” Laura Appel said.
Managed care organizations help employers understand their role in managed health care by offering tangible plans that accommodate the needs of their workforce. These plans also help employers maintain their costs without reducing coverage.
According to Schmidt, in an increasingly complex health care ecosystem, patient outcomes are an important measure in highlighting the effectiveness of appropriate care that also controls costs. It is important for employers to work with managed care plans to accommodate the specific needs of their workforce. Only then will they be able to control costs and partner with their patients/employees to reduce the prevalence of chronic diseases.
“As more of the global workforce embraces working remotely, we’re noticing the same shift in the delivery of health care,” said Jeff Romback, vice president of Strategic Business Operations at McLaren Health Plan. “Just as people expect work delivered to wherever they are, they expect to have their health care delivered there as well. This is increasingly happening through telehealth and other virtual health tools.”
A good example of how new approaches help reduce costs without compromising quality of care is the partnership between HAP and Bongo, a cellular-enabled device that allows diabetics to receive more prompt care. With diabetes-related expenses exceeding $320 billion a year, HAP’s partnership with Bongo allows their patients to send the results directly and instantly to care management. Care management then contacts the patient within 30 seconds if there’s a sign of trouble.
Without this tool, Genord said, patients would have to contact a doctor, wait for a return call or head to urgent care or the emergency room. “By [using Bongo] patients are healthier. They aren’t missing work because they were in the ER all night because of a diabetic incident,” he said.
Romback said some employer groups have experienced double-digit increases in their behavioral health expenses during the last year. “We have solutions available for pennies on the dollar. That’s value,” he said.
INTEGRATING CARE ABOVE AND BELOW THE NECK
The pandemic caused fundamental changes in how people and companies work, including how people access health care. Beck noted that Americans have increased their use of and engagement with mental health services in recent years, but during the pandemic, demand for mental health services spiked, highlighting the importance a wider network of providers.
In early 2019, about 11 percent of U.S. adults suffered from depression and anxiety. That year, national spending on mental health care totaled $225 billion. Since April 2020, however, the number of people with mental health conditions jumped to 42 percent of adults, or 80 million more people.
According to Journal of the American Medical Association, the estimated cost of these conditions is $20,000 a person per year or $1.6 trillion annually.
As a result, employers are increasing employee assistance programs, said Adam Beck, vice president of Employer Health Policy and Initiatives, American’s Health Insurance Plans. “Mental health services are important and critical healthcare benefits for employee assistance programs,” he said. “Provider shortages and bifurcated state and private systems are impediments to proving these valuable services.”
Priority Health’s Schmidt said problems like this only amplify the need for 360-degree approaches to care. We need a full picture — the behavioral, mental and full-body physical health sides — to solve for chronic disease, she said, adding that patients struggling with depression can’t engage and help control their diabetes.
Appel agreed: “A lot of people want to say, ‘mental health care and physical health care.’ And I try to stay away from that because, last I checked, my brain is part of my body.” Chances are, if there are employees with chronic disease, they likely have depression and anxiety and vice versa, she said.
“If I could wave a magic wand, it would be to have employers demand integration,” Appel said. “We really need a demand that says, ‘I want you to take care of my person in a way that recognizes those two things are coming together.’” Taking a 360 approach to health care includes taking into consideration patients’ social determinants —the conditions in which people live, learn, and play—and “integration of care provisions above and below the neck,” said Appel.
Although it appears that the burden falls to employers, managed care experts emphasize their goal is to be a partner in the process. Beck said managed care plans offer case managers, nurse advocates and others who can support the business owner and the employees. But getting people to engage in the services requires help from employers to destigmatize mental illness and encourage employees to seek the help they need.
Genord said the stigma also is reduced when patients have tools, such as virtual health care that doesn’t require them to go to a mental health clinic, at their disposal.
“How do we know what services to provide the member without knowing what they need?” Romback asked. “Continuing a bifurcated system is not going to help us help our members – or the people of Michigan – get the care they need. We have to get a full view of the member from the top down.
“We know we can do more. Stakeholders are beginning to look at physical and behavioral health integration and how health plans can play an important role.”
Biosimilars offer safe, cost-effective alternatives.
LEGISLATING PRIOR AUTHORIZATION
A major challenge for managed care plans is providers’ resistance to prior authorizations, which is how health insurers determine in advance if they will reimburse a prescribed treatment, medication, procedure or service.
“This is the process where the health plan will become involved to make sure it’s the right level of care, clinically and medically necessary, and the appropriate price to get a high-value outcome for the individual,” said Pallone.
Legislation that has recently passed the Senate (Senate Bill 247) aims to improve the prior authorization process, and MAHP is supportive of these efforts.
“You know, the number one rule of being in a hole is to stop digging. We don’t want to throw away the tools that are helping us, even if they are marginal,” Pallone said. “When used appropriately, when used properly, those tools help provide better outcomes for the member at a lower cost.”
Although tools are in place to help employers and health plans optimize services while balancing the cost of care, they are not utilized well, said Beck. One way to improve would be for health plans to position themselves as partners in this effort instead of merely “bill payees.” Schmidt agreed that a sustained outreach effort is key to the success of managed care plans, noting it is their “responsibility to engage” with employers instead of expecting employers, who need to focus on business operations and growth, to lead this charge.
The pandemic revealed, as never before, the virtual tools available to both providers and consumers, with managed care plans becoming the “connective tissue” in the safe delivery and coordination of care, said Dr. Genord.
It also highlighted the importance of a single point of access, said Romback, while revealing gaps in such systems as Medicaid. The lack of integration between information sharing platforms used by managed care plans vs. the system used by Medicaid, for example, creates a divided system that is neither sustainable nor is it aligned with the 360-degree approach to wellness.
To provide the right care, at the right time and right place, reforms are needed that offer transparency to consumers, both in terms of costs and clinical outcomes, said Appel. Overutilization of care is a real problem that is documented, information that should be readily available to consumers. Managed care plans can also reduce authorization steps in cases where clinical data supports a procedure, for example, thus increasing trust among providers.
Schmidt concurred, noting that managed care plans lose the argument with providers and consumers when they impose restrictions without providing adequate data and specificity.
Mental health providers are difficult to find and recruit.
ADDRESSING THE PRESCRIPTION DRUG PROBLEM
Another challenge is managing prescription drugs and drug costs. Prices, which have been running rampant for years, increased at more than twice the rate of inflation in 2020, according to AARP.
Experts say the pharmaceutical price problem is something that needs to be handled at the federal level.
“There’s an utter lack of transparency and accountability,” said AHIP’s Beck. “You have drug prices that are set at any factor or level often with no basis. In reality, they’re not based on what was actually spent to develop that drug or what it actually costs you to manufacture and sell that drug. So, it’s exploitive.”
Jackson, of the Economic Alliance of Michigan, agreed, adding that the big three pharmaceutical manufacturers represent 80 percent of the marketplace.
“The pharmacy system in the U.S. is broken,” he said.
Still, managed care plans do what they can to soften the blow to employer clients.
“One to 2 percent of employees (with a significant condition) are driving 50 percent of pharmacy cost spending,” said Priority Health’s Schmidt. “These drugs can, on average, be $10,000 to $40,000 for a 30-day supply. We look at how we help that member through the very difficult medications they’re taking, while also recognizing there’s a cost component. We’re helping be a good fiduciary to our employer groups by doing utilization management.”
The health plan embeds care managers, has conversations with pharmacists, and works with physicians to make sure patients have the support they need, she said.
In addition to providing support, managed care plans partner with MAHP and other advocacy groups to find alternatives to the currently available high-priced drugs.
“Michigan is one of the leading states in terms of adoption of biosimilars because of managed care plans,” Jackson said. Biosimilars are FDA approved, nearly identical copies of the products not made by original manufacturers.
Even so, he said, “we need a national solution to this drug problem,” and unless Congress aligns pharmaceutical pricing rules between Medicare and private health plans, the country will end up with a bifurcated market.
Thoughtful legislation is key to managing health care costs.
THE VALUE OF MANAGED CARE
Seventy percent of consumers with employer-provided health care report satisfaction with their managed care plans. Health care plan companies promote educated, thoughtful use of health care by partnering with employers to create customized plans for their workforce. This shared role and responsibility results in improved patient outcomes, goals, and productivity, said Schmidt.
It is imperative, said Jackson, for employers to become informed consumers so they can offer their employees the right plan and tools. Partnering with the health care system is the best way to align incentives and keep costs manageable.
Overall, managed care brings employers innovative solutions that help them increase health and wellness for their employees and benefit bottom lines, Dr. Genord said.
“We owe it to entrepreneurs, small business and others focused on their trades to bring solutions and partner with them to create plan designs, remove barriers to health care, remove stigmas, and coordinate and make their care as easy as possible.”
This sponsored article originally appeared in Crain’s Detroit Business. Read more here.back to blog