Money is the leading cause of stress for Americans and it is striking at their health and work lives. A major cause of this is the concern about the rising cost of healthcare. This sets off a vicious cycle as stress further increases expenses on health.
A 2019 report by PwC titled Medical Cost Trend: Behind the Numbers 2020 identified three key factors that drive the rising cost of healthcare: increased drug spending, increased prevalence of chronic diseases, and greater access to mental health services. All of these factors center on stress.
According to the report, drug spending under private insurance is projected to rise by 3 percent to 6 percent per year. Furthermore, per capita health spending on an individual with chronic disease is eight times that of a healthy person. As a result, a further rise in the incidence of chronic diseases such as diabetes and heart disease will shoot the cost of healthcare up significantly.
Consequently, employees - especially those covered by large employers - are left with high deductibles and out-of-pocket costs - and the stats for this are also staggering. According to an August 2019 brief by Kaiser Family Foundation, healthcare spending by families increased by more than 67 percent from $4,617 to $7,726 over the last decade. It also found that the average healthcare cost paid by large employers as premium contributions for family coverage increased by 51 percent.
And experts project that this trend will only continue.
So the question is how will the average worker keep up with these rising costs? Will their jobs and insurance plans help them to access their healthcare needs going forward? According to recent data, most workers find themselves troubled by these questions.
What is even more concerning is that employers are not offering much help for workers to tackle these challenges. According to the PwC data, only 18 percent of workers said that their employer had offered financial wellness programs to assist with these issues.
Consequently, this high healthcare cost has become a major factor influencing employee’s health care decisions. For instance, most employees enrolled in high-deductible health plans (HDHPs) are more likely to delay or skip care for fear of incurring huge costs.
But the truth is that employees have little control in assuaging these concerns. Even if their employer offered financial wellness programs, workers may still need special knowledge and skill in handling these financial worries to fit their individual needs - this is where the role of their employer comes in.
What Employers Can Do
Help workers make informed decisions on healthcare plans.
One of the ways employers can reduce healthcare spending is by providing health savings accounts (HSAs) for HDHP enrollees. This account sets aside funds - contributed by both employees and employers - for essential services not covered by HDHP plans before deductibles are met.
The contributions to the HSA are fully deductible and withdrawals for medical expenses are tax-free. Besides, any money left in the account after the deductible is met earns interests for the employee.
Currently, more than 60 percent of workers with health insurance coverage are enrolled in a high- or mid- deductible insurance health plan, thus, are eligible for a health savings account. However, only 38 percent of them use their HSA.
Conversely, more employers are offering HSAs for HDHP enrollees. The 2018 Employee Benefits Survey by the Society for Human Resource Management (SHRM) found that the proportion of employers who offer HSAs increased from 45 percent in 2014 to 56 percent in 2018.
This discrepancy suggests, again, that employees are not using these accounts. According to a 2018 Willis Towers Watson Survey, the primary reason for this is because workers do not know how it would be of benefit to them.
Employers need to do more than offer these options; they need to educate workers on the advantages of HSAs with real stories of cost savings and better healthcare outcomes linked with using the accounts. More so, to show their commitment to helping employees take advantage of this benefit, employers can contribute to the account.
Offer Preventive and Management Programs for chronic diseases
Chronic diseases constitute the largest single contributors to healthcare expenses. In 2016, health care costs for these conditions cost the US about $1.1 trillion and as the incidence of these diseases continues to grow, experts estimate that this figure may rise to $42 trillion in 2030.
Therefore, offering wellness programs to prevent and manage these chronic diseases can significantly lower the healthcare burden that employees face. A recent report by Partnership to Fight Chronic Disease notes that behavioral changes to curb chronic diseases (increased physical activity, reduced alcohol use, tobacco cessation, and healthy weight loss) can lead to cost savings of up to $116 billion every year.
Employers, therefore, need to incorporate workplace wellness initiatives and create a culture of health in the workplace. Steps to achieve this include:
- Encourage physical activity by providing discounted gym memberships, leveraging wearable technology, and offering fitness breaks at work. A subtle way of achieving this is by holdingwalking meetings in place of sit-down meetings.
- Establish an effective tobacco cessation policy and provide comprehensive tobacco-cessation and therapeuticprograms for employees.
- Promote food wellness by educating employees on healthy food options, creating active food wellness programs, and including healthy foods in the workplace cafeteria.
These evidence-based interventions significantly lower the risk of these diseases and, in turn, healthcare spending. For instance, a recent study by Transamerica revealed that Johnson & Johnson recorded a 3.7 percent lower average annual growth in total healthcare spending after introducing wellness programs into its companies. This led to cost savings of up to $3.92 for every dollar invested in wellness programs for its employees.
Encourage employees to watch for unnecessary treatment expenses.
A study by NPR found that Americans spend about $210 billion on unnecessary treatments every year. Employers can help workers avoid this by establishing prior authorization requirements and capping costs with reference-based pricing, for instance.
With prior authorization plans, healthcare providers give insurers and employers a prior analysis of required investigations and treatment procedures. This helps the payer determine what is necessary. This also helps the insurer explore a more cost-effective way of achieving good clinical outcomes for employees, such as physical therapy instead of an unnecessary $25,000 back surgery.
Reference-based pricing allows for selecting healthcare providers based on a variety of price listings. This gives employers and employees control over where they get care based on cost. For instance, capping reimbursements at a certain level (or reference) helps employees to avoid providers that charge over the set prices.
Furthermore, many employers are beginning to explore direct contracting as a way to mitigate the sky-high costs incurred from unnecessary treatments. Using this model, the employer sets the rates for care and is not constrained by reimbursement rates. Also, direct contracting ensures the provider and employer have direct access to each other to discuss issues about care such as lost claims and quality improvement.
Other cost-saving care opportunities include pharmacy benefits such as discounted prices for ordering medications in bulk or choosing generic drugs.
Reduced healthcare costs benefit all stakeholders, especially the people who bear the brunt of it - the employees. As healthcare costs continue to rise, employers are left with no other option than to explore effective strategies to curb excessive healthcare spending while maintaining high-quality care for their employees.