Health care costs are a perennial business challenge. How do you offer competitive benefits that help attract, retain and keep employees healthy without breaking the bank?
While variables such as the size and demographics of their employee population will shape a company’s overall benefits approach, one strategy that is universally effective is leveraging health care quality and cost information. By engaging employees in selecting high-value care — that is, high-quality care at a fair price — self-insured companies can achieve direct savings in the form of lower claim costs, as well as the indirect benefits of a healthier workforce with lower rates of absenteeism.
Always a large line item for employers, health care costs continue an upward march year after year. According to Business Group on Health, health care costs for large employers were projected to rise more than 5% in 2021, despite the sharp declines in utilization during the beginning of the coronavirus pandemic.
Unfortunately, our health care system is historically opaque when it comes to pricing. Most consumers don’t know what their care is going to truly cost until they’re in the facility, or worse, bills begin to pile up after care. What’s worse is that consumers and their employers may end up spending exponentially more for a procedure simply by choosing one provider location over another.
According to Healthcare Bluebook data, U.S health care prices vary an average of 650% for the same procedure in the same market. By and large, it’s the location or facility, not the physician, that influences the cost. Consider that price variation in another way: choosing the higher-cost provider setting is like selecting a gas station where you’re spending $16 per gallon at the pump versus $2.50 per gallon. We’d never overpay like that for gas, but we do we do it all the time in health care because we can’t easily see and compare prices.
1. Provide the data
Recognizing some of these cost disparities and the helplessness of consumes to identify them on their own, government leaders have started taking steps to promote increased price transparency. In January new rules went into effect requiring hospitals to post online their pricing for 300 services and procedures and by 2023 health plans will need to publicly share their negotiated prices, as well. Unfortunately, hospitals have been slow to share this information, and the data has not been easy for consumers to decipher.
For employers to encourage good health care shopping habits, it’s key to direct employees to information that is accurate, easy-to-access and user-friendly. These kinds of tools may be available through an employer’s third-party administrator or health plan partner, and there are several independent third-party vendors that specialize in health care cost transparency for self-insured employers.
When considering options, look for a tool that allows price comparison among local providers, as well as benchmark data that indicates how prices compare to the overall market. In the absence of benchmarks, one might think Hospital A is a better choice than Hospital B because the cost of care for their procedure is $1,000 lower — when in fact both facilities are several thousand dollars above the fair price in their market.
In addition, the best transparency tools also provide information on health care quality by procedure. This allows individuals to identify a health care setting that is both affordable and likely to deliver strong outcomes, two things that don’t necessarily go hand-in-hand. This provides the dual benefit of guiding employees to care settings that produce strong results with fewer complications, helping them feel better faster and get back to work more quickly.
2. Explain the value
Getting employees to buy into the concept of shopping for care, and actually use cost and quality information, begins with explaining the value — both to the individual, and to the organization.
For workers who are used to paying a flat co-pay or a relatively low deductible, they may not think twice about the total cost of a visit or procedure. Let employees know how their care decisions matter to the financial health of the organization and, ultimately, the entire workforce. The average individual may not realize how high-cost care can add up across a population and, if unchecked, may result in increased employee cost-sharing or reduced benefits.
More importantly, make sure you talk about what’s in it for them. Depending on your benefit structure, workers may see direct out-of-pocket savings from choosing a lower-cost health care setting. And if quality data is part of your transparency offering, they can make a selection that improves their chances of a positive outcome, which means a faster recovery with fewer complications.
3. Create incentives
One of the most effective ways to drive engagement is by offering incentives for using health care transparency tools and selecting high-value providers. Reward programs can be structured in many different ways, depending on the needs of the organization. Employers might establish a system of wellness points, make contributions to an employee’s Health Savings Account, offer reduced cost-sharing (zero co-pays or deductibles), or even send a personal check with cash rewards when the employee engages in certain shopping behaviors.
Not surprisingly, cash incentives are often the most effective strategy because they offer an immediate, tangible win for the employee. Common structures include offering a set reward dollar amount for shoppable services when the employee selects a provider. Organizations that want to be even more aggressive may offer employees a percentage of the savings created by selecting a lower-cost, higher-quality provider or care setting.
In all cases, these programs should be structured so the award amounts are enticing but, ultimately, add up to a small share of the organization’s total savings from engaging their workforce in shopping for care. On average, organizations that take this approach experience $10 in savings for every $1 spent on rewards. And greater engagement with the member population means higher levels of savings and higher member satisfaction.
Consider the example of one employee who discovered that receiving a knee arthroscopy at his orthopedic surgeon’s affiliated hospital would cost more than $14,000 when factoring in the cost of an X-Ray, MRI and the surgery itself. However, if the same doctor performed the same services at his affiliated outpatient surgery center, the total cost would be just $2,600. He chose the lower cost setting – saving his employer nearly $12,000, which was certainly worth rewarding.
4. Make it fun
Most employees don’t pay much attention to their benefits programs outside of enrollment season or when they need care. To ensure your workforce is more likely to shop for a lower-cost, higher-quality provider when the time comes, steady communication and virtual engagement are helpful when offering transparency tools. Email outreach – with welcome kits, guided tours, and reminders can help keep the tool top-of-mind throughout the year.
In addition, some transparency offerings include fun and memorable interactive games that offer an opportunity to educate employees at the same time. For example, an online game like the “Price is Right” may ask employees to guess the fair price for particular health care services in exchange for wellness points or other incentives. Another may challenge employees to use the cost transparency tool to find the highest-value providers for a particular service in their region.
According to data from Healthcare Bluebook, employees are 11 times more likely to shop for care after completing a game.
The health care industry has operated unlike any other industry for decades, with very little to no visibility into the cost or quality of a service until it’s already completed. Consumers, employers and national leaders are increasingly calling for more transparency so everyone can better understand the value of care before they choose where they’ll get a needed lab test, MRI or surgery. Thankfully, there are tools and data already available that can help employers save money and improve the health of their workforce by enabling health care shopping. It’s just a matter of getting those tools into employees’ hands and sparking engagement.
Scott Paddock is the CEO of Healthcare Bluebook, an industry leader in guiding patients to high-quality, affordable care using objective quality and cost information. A pioneer in the healthcare transparency space, Bluebook’s purpose is to protect consumers and companies nationwide from overpriced, low-quality health care.