Trading high deductibles for narrow networks

https://mailchi.mp/f3434dd2ba5d/the-weekly-gist-december-20-2019?e=d1e747d2d8

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For many employers, narrowing provider networks has been a bridge too far, despite unrelenting healthcare cost growth.

A recent Los Angeles Times profile of a Boston union that was able not only to lower costs but also nearly eliminate employee cost-sharing may make doubters reconsider. Unite Here Local 26, which represents 9,000 hotel workers and their families, implemented a narrow network health plan in 2013, when two-thirds of its members agreed to forego care at certain marquee academic hospitals, which charged two to three times more than others in the Boston area.

Today the union actually pays less in medical costs per member than it did six years ago, and premiums are ten percent lower than the national average, despite Boston being one of the highest-cost healthcare markets in the country. Employees pay no deductibles, and generic medications cost them only $1. Savings have translated into raises for many employees, with some low-income workers seeing a pay jump of up to 39 percent across six years.

As we’ve discussed in the past, employers are reaching a limit on how high they can push deductibles, especially in a tight labor market. Some are beginning to experiment with various network options that lower health care costs—but many have been reticent to change benefit design in any way that could be perceived as narrowing choice.

Local 26’s experience shows that well-designed narrow networks, implemented with employee education and buy-in, can provide cost relief for both businesses and individuals that can be sustained over time.

 

 

Denver Provider Market at ‘Tipping Point,’ Study Finds

https://www.healthleadersmedia.com/finance/denver-provider-market-tipping-point-study-finds?spMailingID=16259324&spUserID=MTg2ODM1MDE3NTU1S0&spJobID=1720747610&spReportId=MTcyMDc0NzYxMAS2

The report expects employers and health plans to exert more influence in demanding market power going forward.

Health systems and physician groups have dominated the Denver healthcare market in recent years, but a new study indicates that employer-purchasers and health plans are poised to disrupt that dynamic. 

Supported by existing legislation, activism from local businesses, and the efforts of Gov. Jared Polis, the Denver market is at a ‘tipping point,’ according to a Catalyst for Payment Reform (CPR) and the Colorado Business Group on Health (CBGH) report released Thursday morning.

The study specifically referenced the RAND report from May which found that payers were paying rates to providers well above Medicare levels, noting that employers have an opportunity to pressure insurers to engage providers in contract arrangements that better align with care rendered.

Researchers believe that payment reform is achievable in Denver, suggesting six policy recommendations to business groups, lawmakers, and insurers, including the expansion of price transparency measures and promotion of benchmarking prices relative to Medicare.

Corralling healthcare prices has been a primary issue in Colorado this year, with the state most recently pursuing a reinsurance program that Polis expects to lower premiums by 18%.

The study found that four major health systems, HCA Holdings, Centura Health, UC Health, and SCL Health, accounted for 85% of patient admissions in 2017. On the Herfindahl-Hirschman Index, this level is considered “moderately concentrated” but the report highlights that it also means the market is “concentrated enough to stifle price competition.”

While providers have concentrated in the market through continuous merger activity, the study found that insurers are governed by strict regulations. The result has been Coloradans facing 13% higher prices compared to the national average and 5% high utilization rates.

Two of the recommendations offered by the study were to align two-sided risk arrangements with Medicaid and the Polis-Primavera “Roadmap to Affordability,” the governor’s strategic initiative to make care more affordable, as well as to implement benefit designs to “encourage consumers seek higher value care.” The study also urges that employer-purchases to pursue value-oriented programs that hold providers accountable to the listed targets.

However, in an interview with HealthLeaders earlier this year, Centura Health CEO Peter Banko said the system was going to “pause on the mad rush” to value-based care models, citing the direction the market was taking on the issue.

As highlighted in the RAND report, CPR and CBGH believe that building on purchaser momentum through a statewide purchase cooperative can be an effective method at changing the market dynamics in Denver.

Similar to the Employers’ Forum of Indiana, an employer-led healthcare coalition which collaborated on the RAND report, the Peak Health Alliance, a Summit County-based purchaser cooperative, has sought to combat rising healthcare prices in the Denver area. The report states that Peak Health, which represents 6,000 covered lives, has already negotiated a “very aggressive” reduction in rates with Centura.

Bob Smith, MBA, executive director of CBGH, said that the report gives employer-purchasers “the tools to make changes” to the Denver healthcare market and stem the tide of rising prices.

“Healthcare costs, primarily driven by high prices and seemingly unwarranted increases, are edging out salary growth and economic development,” Smith said in a statement. “These trends are taking a toll on every employer from school districts to manufacturers and are simply not sustainable.”

Smith urged lawmakers to act on the report’s suggested reforms but also said that employers now have “the responsibility to act.”