Unexpected medical bills are a leading cause for bankruptcy in America with health insurance premiums increasing 213% between 1999 and 2016, according to a survey of employer-sponsored benefits by Kaiser.

Of the medical disorders driving high premium increases, musculoskeletal disorders account for more than half of the procedures. An estimated 126.6 million Americans — one in two adults — are affected by bone and muscle conditions comparable to the total percentage of Americans living with a chronic lung or heart condition, according to the United States Bone and Joint Initiative.

This cost is estimated at $213 billion in annual treatment, care and lost wages. To cut these cost down, Andrew Neary, healthcare strategist with benefits brokerage The Olson Group in Denver, says there are three challenges employers need to look at to counter these high claims and high premiums.

The first, is that insurance companies have no desire to save employers or employees money. This is due to the medical loss ratio, a financial measurement used in the Affordable Care Act to encourage health plans to provide value to enrollees.

The goal was to put a cap on the amount of revenue an insurance company could bring in for every premium dollar they made. If an insurer uses 80 cents out of every premium dollar to pay its customers’ medical claims and activities that improve the quality of care, the company has a MLR of 80%.

“It made sense; we cap the insurance, cap the premium and cap the revenue then we can have a chance at curbing health insurance cost,” Neary says. “The problem is that the ACA curbed it at a percentage.”

If the insurance companies spent and made too much money on benefit cost, administrative cost, revenue and overhead, they would have to return the money back to the employer. This created a disincentive for health insurance companies to help clients lower their medical and pharmacy claims.

Also see: Medical management firms pull the curtain back on healthcare provider costs

The second challenge for employers is to understand who is compensating the broker and how much they are compensated. Is the broker aligned with the employer’s financial objectives?
“For the past 10 to 20 years, most brokers have been getting paid a percentage of the premium employers pay as commission,” Neary says. “As the medical premium has gone up so has the broker’s pay.”

Finally, the third challenge employers need to confront is ensuring employees do not treat their insurance card as a personal credit card. Neary says as long as employees remain in their PPO networks they can spend as much as they want wherever they want, provided they remain in the network.

“This is how your employees are buying their MRIs, surgeries and CAT scans,” Neary says. “Employers do not have an insurance problem; they have a healthcare supply chain problem, and trying to fix a supply chain problem with an insurance solution will never work.”

One way to correct the supply chain problem is to reduce the number of surgeries occurring within group health plans. Dutch Rojas, CEO of Sano Surgery — a surgery benefit management firm in Scottsdale, Ariz. — says that roughly 35% of surgeries are not necessary for employees.

“There is a clinical indication for the procedure, but the outcomes they receive did not do anything for them,” Rojas says. “Employers can discourage employees from having surgeries by making second opinions mandatory.”

With a second medical opinion, the employee could discover that their condition is not as severe as originally diagnosed and if they do require surgery after the second opinion, they can begin to search high quality, low cost facilities to complete the procedure.

Many of these high quality low cost procedures do not have to be conducted in a hospital. Rojas says employees need to be educated on what the differences are between in office procedures, ambulatory surgery center procedures, a surgical hospital procedure and a hospital procedure.

“Eighty percent of procedures that were rendered in 2017 — 112 million procedures and surgeries — did not need to be done in a hospital,” Rojas says.

All of these options are offered through direct primary care — a type of primary care billing and payment arrangement made between the patients and providers, without sending claims to insurance providers.

One of these direct primary care providers is David Williams, vice president of sales and business development at Zero Card. Williams says he is attempting to reimagine the healthcare supply chain to lower plan costs, improve the member experience and maximize value for all.

“Medical costs continue to rise and employers and employees have no way to manage the actual cost of care,” Williams says. “Price and transparency for services does not exist today.”
Since 2000, price and not demand for services or aging of the population, has produced 91% of the cost increases in the U.S. healthcare system today, according to The Journal of the American Medical Association.

Williams says while utilization management and the baby boomers make up a percentage of the increased cost in healthcare, it is only a small portion compared to employers demanding broad choices of where employees can have their procedures done and the creation of large PPO networks to accommodate them.

“Employers have now exposed themselves to massive variants in pricing,” he says. “In our database of over $1.7 billion in medical claims — over 200,000 members — we’ve seen the lowest price to pay for a knee replacement be $17,422 and the highest be $128,002.”

By going the direct primary care route employers can eliminate the large variants in price for procedures and the employer and employee can then shop medical facilities for the best price rather than picking a hospital at random or that just happens to be the closest one to the employee’s home.

“We looked at 157,000 unique members, over $1.7 billion in medical spend and we found 4,648 procedures completed under musculoskeletal surgery,” Williams says. “That totals a paid amount of $50,942,686 collectively by employers. Had those procedures gone through direct primary care, it would have cost $27,923,686 saving employers $23,018,753.”

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