How employers might reduce healthcare costs

While it appears that the Affordable Care Act (ACA) may have slowed the rate of annual increases in health insurance premiums, the overall cost of health insurance continues to rise (Kennedy, June 5, 2014; Mangan, October 3, 2014; Ungar, October 31, 2014). Employers subsequently continue to face the dilemma of either absorbing the annual cost increases and thereby reduce potential profit or passing these costs onto their employees and thereby reduce potential take-home pay for their employees. In other words, do you face the ire of shareholders or workers?

To reduce the impact of this dilemma, employers in great numbers have contracted with wellness companies that promise to reduce healthcare utilization through concerted efforts to get employees healthier or at least keep them well. The idea is that an overall healthier workforce leads to less healthcare utilization, which, in turn, should reduce the subsequent year’s rate of insurance premium increases. (Note: a company’s health insurance premiums are in part determined by the extent to which the employees of that company have utilized healthcare in the previous year – in short, the more healthcare a company’s employees obtain this year, the greater their premiums will be next year.) Conceptually, this move to contract with wellness companies to get employees healthier seems like a good idea, as it is logical that it should reduce the following year’s premium (or at least reduce the rate of increase). Empirically, however, the wellness industry has yet to demonstrate convincingly that they can successfully carry out their promise of reduced insurance premium costs through improving the health of employees.

Meanwhile, the cost of insurance continues to rise.

Perhaps it’s time to think outside the box. How else could employers reduce the annual cost of insurance premiums?

Maybe, it’s time for employers to become more knowledgeable about what they are buying with their health insurance and begin to determine, in some broad ways, what their health insurance tends to pay for and what costs get subsequently passed onto them in the form of insurance premiums. Specifically, they could become more knowledgeable of the fact that they are buying health insurance, which routinely pays for care that is known to be ineffective on average.

That is to say, employers buy into a system that provides care to their employees, but some routine forms of care typically do not make the employees healthier or return them to work faster. Health providers nonetheless deliver such care and insurance companies pay for it and then pass on the costs to employers in the form of premiums. And employers unknowingly and routinely allow it.

Why is that?

Companies typically keep a close eye on their costs. They make it their business to know enough about, say, their various suppliers’ operations to know if or when their suppliers are engaged in ineffective practices the costs of which are subsequently getting passed on to them. They don’t remain ignorant of these potential costs. As such, they can assert pressure on their suppliers to either clean up their act and reduce costs or the company can go elsewhere to get their supplies.

Historically, however, employers have remained ignorant of practices related to the suppliers of their employee healthcare. They buy into a system of healthcare providers and insurance companies and subsequently trust that the latter two entities will regulate themselves to always act in the best interest of the employer.

Maybe it’s time for employers to become knowledgeable enough about healthcare to know what they are buying with all that insurance premium money. Maybe it’s time for employers to at least know if their employees are getting effective care or not. Such knowledge brings the power to reduce costs. Employers would subsequently know enough to stop paying for care that is known to be ineffective on average.

Do people get care that’s known to be ineffective?

It may be surprising to learn that the healthcare industry commonly delivers care that is known to be ineffective on average. Let’s take the case of common therapeutic procedures for low back pain. Low back pain is one of the most common reasons for seeking care with a healthcare provider (St. Sauver, et al., 2013). Over the last few decades, the delivery of spinal injections, spinal surgeries and the use of narcotic pain medications have risen exponentially (Deyo, Mirza, Turner, and Martin, 2009). However, numerous clinical trials, reviews and meta-analyses of these therapies show that at best they are not very effective (Bickett, et al., 2013; Gibson & Waddell, 2007; Iverson, et al., 2011; Martell, et al., 2007; Staal, et al., 2008; van Middelkoop, et al., 2012).

In the case of low back surgeries, for example, Brox, et al. (2003) undertook a study comparing lumbar fusion to a treatment consisting of nine physical therapy appointments plus a one-hour facilitated discussion about coping with back pain. They found that the fusion surgery was helpful, but no more helpful than the non-surgical treatment. Importantly, for our discussion, and for employers who are buying the insurance that pays for such common care, the cost of fusion surgery is exceptionally more expensive than physical therapy and a one-hour discussion. Despite this added cost, there is no added value to the fusion.

Narcotic, or opioid, medications are commonly prescribed for back pain despite their lack of proven effectiveness. In worker’s compensation cases, for instance, those who receive the medications have up to 14 times higher risk for chronic work loss when compared to those who don’t receive the medications (Volinn, et al., 2009). A previous study showed that the use of narcotic medications early after onset of low back pain is similarly associated with greater work loss – with being out of work for up to nine weeks more than those who don’t receive the medications (Webster, et al., 2007). Again, despite these findings, narcotic pain medications are ubiquitously used for low back pain and insurance companies routinely pay for it. They subsequently pass these costs on to employers in the next year’s premium increase. Just as routinely, employers pay for the premium increase or further pass on the costs to their employees.

So, what can employers do about paying for ineffective care?

Employers should get educated on what they are buying

In years past, it might seem unheard of for lay persons to question the practices of healthcare providers. After all, it’s a social norm to do what the doctor tells us to do. Societally, we rely on the ethics of the healthcare professions to regulate themselves and we simply trust that healthcare professionals will always work in our best interests. It’s time, though, to be concerned about this heretofore unquestioned trust.

Healthcare in the last forty years or so has become a big business. To be sure, there remains vestiges of professionalism -- providers and provider organizations that pursue their work in the best interests of others, such as their patients. But business interests, which, by definition, are self-interests, have taken over large swaths of healthcare, including many healthcare providers and provider organizations. Indeed, healthcare is no longer so much a profession as it is a healthcare industry.

Employers should recognize this change in the healthcare industry and treat their suppliers of healthcare like they treat any of their other suppliers. It’s time for employers to perform a supply chain analysis of the suppliers of healthcare.

To do so, employers need to educate themselves on what is effective and what is not effective. There are any number of organizations, such as the Institute for Chronic Pain, the NNT, the Choosing Wisely initiative, or the Dartmouth Institute for Health Policy and Clinical Practice, whose missions are to bring this information to the public.

Perhaps too, wellness companies should get in on the act. They could contract with knowledge holders in organization like those above to develop educational campaigns aimed at employees. They could teach employees what works and what doesn’t for common ailments so that down the road, maybe the average employee might think twice when, say, they get a referral to the spine surgeon for a new onset of low back pain.

Teaming up with insurance companies and wellness companies

Now, of course, health insurance companies know the data on the effectiveness of various therapies and procedures. At times, they even try to introduce limits on the delivery of ineffective care as they too have a business incentive to do so.

Commonly, however, such attempts fail because they succumb to the power of healthcare provider groups and their political allies. Political charges of ‘rationing care’ when combined with our societal trust in healthcare providers are powerful weapons. Employees thus become upset and angry when their doctors tell them they need a treatment but the insurance company won’t pay for it. Such ire gets subsequently expressed towards employers who were the original buyers of the health insurance. All the stakeholders come to see the insurance companies as the bad guy, only out for themselves at the expense of the hapless patient employee. Out of fear that such perceptions will lead to a loss of the employer’s business next year, insurance companies back down and resume paying for the ineffective care on a routine basis.

Notice, however, that the charge of ‘rationing care’ can only stand when all the stakeholders in the system, with the exception of the insurance companies, remain ignorant of the data showing the care to be ineffective. In other words, the charge of ‘rationing care’ can only succeed in a data vacuum. If everyone in the system knew that the therapy in question was ineffective, then the insurance companies’ policy change to limit the care would make more sense and many would come to agree with it -- and no longer agree with the healthcare provider who is recommending the ineffective care.

As such, insurance companies make natural allies to employers and even, in this instance, to employees who use their insurance to obtain health care. What’s needed is for employers to step up to the plate and educate themselves and their employees as to what is and what is not effective for common health conditions. With the right educational campaign, a combination of employers, insurance companies and wellness companies might succeed at fostering more informed consumers of healthcare that would serve as a regulatory balance to the excessive delivery of ineffective care by healthcare providers. In so doing, more informed healthcare decision-making on the part of employees would lead to reduced utilization of services, which, in turn, would lead to lowered premiums for employers in the following year. It’s a win-win-win for employers, employees, and insurance companies.

Murray J. McAllister, PsyD, is the executive director of the Institute for Chronic Pain, an educational and public policy think tank. The Institute for Chronic Pain brings together thought leaders from around the world to provide academic quality information on chronic pain that is approachable to patients, their families, employers, third-party payers, and public policy makers. In so doing, we aim to change healthcare practice patterns by creating demand for empirically supported treatments for the management of chronic pain. Dr. McAllister also blogs at the Institute for Chronic Pain Blog.

References

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