Finding ways to make sure everyone has adequate health care is one of America’s greatest challenges. As the cost of drugs and services escalate, so do insurance premiums, often making full-service plans unaffordable for many employers, who have no choice but to pass on much of the burden to their employees. Today, many individuals are personally responsible for a significant share of the cost of health care, unlike previous generations of workers, who often received full coverage for themselves and their families as part of generous benefit packages. As a result, if an employee suffers a serious accident, or a family member is diagnosed with a critical illness, rapidly accumulating expenses can quickly wipe out a savings account, creating a precarious financial position and adding to the stress of an already difficult situation. For one North Bay woman, a colossal medical bill underscores the precarious state of America’s current health-care system.
The burden of cost
Linda (not her real name) fell off a horse in rugged terrain in Mendocino County, and found out just how astronomical and life-changing medical expenses can be. “Immediately, when I landed, I knew I’d broken my back,” she says. Nevertheless, she got up and mounted the horse in a standing position so she could reach a spot where she could get help. “I would never have made it on foot,” she says. At the same time, a team of paramedics was responding to a cycling accident in a different area of the county and called a REACH helicopter. Fort Bragg only has one ambulance, and Linda’s injury was more serious, so they decided to send the helicopter to assist her rather than the cyclist.
And that’s when the problem started. She didn’t want transportation by helicopter because the aircraft scared her, but she also expressed concern about the expense. One of the REACH crew asked for her insurance information, and when he learned she had a Blue Cross/Blue Shield PPO, he told her it would cover the cost of the trip, and she wouldn’t even have a co-pay. “They reassured me over and over,” she recalls, and they warned her that she’d have to sign papers acknowledging she’d rejected their advice if she didn’t accept the airlift. They gave her medication, talked her into getting on board and flew her to the trauma center at Santa Rosa Memorial Hospital, where she was hospitalized for 11 days.
Then she received a bill from REACH—a for-profit company—for $86,000 to cover the cost of medical air transportation. She called to query the bill and was told that her insurance would cover it. However, when she received a revised bill, only a little more than $13,000 was deducted, and REACH said that was all her insurance carrier would pay. She contacted Blue Cross/Blue Shield, and a representative told her they had paid the maximum allowed rate, which is $13,336.22, and that’s all they would ever pay for any kind of transportation. In addition, they’d paid for the service, even though it was out of network. She tried to make a deal with REACH, but there was no room for negotiation. “They were not budging,” she says.
What’s more, they didn’t believe one of their employees had claimed her insurance would cover the cost of their services, even though there were witnesses. “How often does it happen that you send someone a bill for $86,000, and they can just write a check?” she asks, incredulously. Next, REACH sent the bill to a collection agency, which started charging 4 percent interest. “People say if you just let it go, the creditor they [REACH] sold it to will drop it eventually,” she says, but the collection agency calls every day, all day long. “They’re not willing to work with me on this bill,” she says. “They just want the money.” Linda points out that if she were indigent, she wouldn’t have to pay anything. “It’s worse when you have insurance. I knew this was going to happen. People fly that thing daily to the hospital, and they just walk away. It’s been a nightmare.” She and her husband were planning to buy a house, but now she believes they’ll be forced to file for bankruptcy.
Most people will never need an airlift, so the service Linda used isn’t typical, but her experience demonstrates how costs can be inexplicably high. The reality, though, is that all health care is expensive, and prices continue to rise. In a white paper titled Transforming Health care Delivery, a Pathway to Affordable, High-Quality Care in America, BlueCross BlueShield Association reports that current spending on health care is $2.9 trillion per year in the United States. The paper also notes that though Americans have the most expensive health care in the world, they aren’t the earth’s healthiest inhabitants. BCBS also identifies three major factors as leaders in driving up costs: the price of prescription drugs, treatment of chronic diseases and unhealthy behavior, such as the use of tobacco products and excessive alcohol consumption, which often lead to costly chronic conditions.
Scott Grenn, a consultant in the San Francisco office of Mercer, a company that designs health and benefits plans for businesses throughout the world, explains that health care costs are increasing faster than inflation, affecting overall affordability. As a result, some employers must find ways to lower costs, so they might ask employees to contribute more to the cost of their health care plans from their paychecks or offer insurance plans that require workers to have higher deductibles, co-pays or out-of-pocket expenses. Family coverage is no longer a given. He expects the increase in costs to be 5.4 percent for Mercer’s larger clients in 2020, though plan changes could reduce it to 4.5 percent.
In a change in trend, however, many employers aren’t passing on the increases to their employees as rapidly as they have in the past. Instead, to slow down escalating costs, employers are focusing on innovative solutions. “Employers with enough critical mass are investing in condition-specific programs,” says Grenn. When better care is available to employees sooner, Grenn adds, it prevents conditions such as diabetes, musculoskeletal disorders and mental health issues from becoming more serious and expensive in the long term. Such strategies might involve giving workers access to a network of specialized physicians, providing an app they can use on their mobile phones, or enrollment in a community of people who share the same condition on a website. For instance, employers can provide access to Livongo (www2.livongo.com), a program that uses technology to provide personal support and coaching for people with chronic diseases such as diabetes, allowing them to manage their conditions more effectively.
Grenn explains that a small percentage of people drives a large part of the costs because they have chronic conditions that need management and might require trips to the emergency room. As a result, some of the programs Mercer suggests are targeted at those fragile populations and focus on those with the greatest need, who also have the potential to incur the highest medical expenses. Ultimately, it’s an approach that results in benefits for both the employee and employer.
High costs put employers who want to offer health care coverage to their employees in a difficult position. “It’s so expensive that employers are struggling,” says Pency Lee, a director at Willis Towers Watson in San Francisco, a corporate broker for strategic planning in the area of corporate benefits and related services. “[Employers] care about their employees, but how do they take care of everyone without going bankrupt?”
Lee reports that many employers pass 20 to 30 percent of the health-care insurance costs to their employees, but as costs continue to surge, they’re reluctant to ask their workers to pick up a greater share. Instead, to impact trend increases, a focus is emanating for many business owners to develop a culture to keep employees healthy lifestyle choices with provided resources to maintain health. Education is key, along with upper management initiatives to develop the kind of culture that encourages employees to be involved in their health care. She has one client who has fresh fruit delivered every week to each of their locations, and others make flu shots and screening appointments available on site. “The soft messaging is, ‘We care. We’re going to support you and offer healthy options,’” she explains.
Some employers also hire third-party vendors to help employees manage conditions with the potential for high costs. One of Lee’s clients offers an eight-week course on managing diabetes and provides a digital scale that measures weight and body fat. Participants agree to weigh themselves every day, and digital data checks make sure they’re compliant and following the program. She reports that musculoskeletal disorders are common for workers who spend most of their time sitting at desks, and companies can offer virtual programs that teach them how to move and stretch along with a digital device that prompts them to stand and do the exercises regularly.
In addition, technology offers software applications that allow people to track their eating habits and develop good practices via smartphones for easy access. “The digital world gives people opportunities,” says Lee, and she also points to telemedicine as an efficient method of providing medical consultations. She explains that an employee makes an appointment with a physician and goes to a private room for a half-hour video chat, rather than leaving the worksite for the appointment. Such strategies are part of the promotion of wellbeing in the workplace. “It’s engagement from on-the-ground advocates,” says Lee, who adds that it includes mental, spiritual, financial and social health as well as physical health, thereby encompassing a wholistic view of an individual. “In today’s social media-focused environment, isolation and the lack of physical social interaction has added loneliness as one of the stressors, especially with Millennials.”
As the health care-industry adjusts to demands for cost mitigation, new approaches to cost share are emerging. “The cost of pharmacy has gone off the charts for some high-risk conditions,” says Lee, observing that some treatments can reach into the millions of dollars. Specialty medication costs are on the rise. For example, Hepatitis B is very expensive to treat, but there’s now a cure. She suggests various opportunities to mitigate increasing costs, including the promotion of using generic versions of medication when appropriate and using mail-order services for pharmaceutical products since it lowers the administrative cost that goes with filling a prescription in a retail store.
Lee also recommends low point-of-care plans such as on-site clinics, and visiting an urgent-care center instead of an emergency room, if possible, since urgent-care centers can offer treatment for non-emergency conditions, thus avoiding the high cost of emergency rooms. “If you go to a facility that’s contracted by your provider, the benefit to the patient is lower out-of-pocket costs because of these contracted rates, and the claims are automatically processed,” she adds. There are centers of excellence for specific treatments that are available at lower out-of-pocket costs. Such clinics specialize in one procedure such as colonoscopies, and have lower operating expenses with expertise and efficiencies in the service provided, which tends to be more cost effective. Medical campuses that offer their services on one site are more cost-effective as well. In addition, there are plans offered by some insurance carriers with narrow networks and with specialized services that offer lower premiums without reducing the quality of services.
Patients rarely know the cost of the care they receive beforehand, so in November last year, the U.S. Department of Health and Human Services announced that it plans to implement new transparency requirements designed to increase competition among health care providers, which, it predicts, will subsequently lower costs. The new rules are the result of an executive order, and the goal is to make health care prices clearer by requiring providers of health care items and services to give consumers access to cost-sharing information. Group health plans and issuers of health care insurance will be required to make the information available online as well as on paper for those who request it. A second rule would require disclosure of negotiated rates for in-network providers and allowed amounts for out-of-network providers on a public website. The intent in making the information public is to assist the consumer and create new opportunities for researchers, employers and developers who can build new tools to benefit consumers.
Lee, however, points out that the information HH&S will require is already available and has been for some time. “There are price differences between providers, hospitals and even the drug stores where you pick up your prescriptions,” she points out, though people don’t usually comparison shop for health care. “They defer to their doctors because they represent the authority figures,” she explains, so while transparency is an avenue to lower prices, she believes it has to be paired with employee education and empowering people to take responsibility for making the right choices. The idea of consumerism in medicine is not new, and she’s not sure how many people will take the initiative to use the tools to make comparisons without education and a paradigm shift. In addition, the health-care industry is a big engine and is influenced beyond the health care medical market, she says. “As long as packaged foods and fast foods are cheaper than eating organic, the capitalistic food industry will drive behavior that will influence the health of our environment, regardless of the progress with pharmaceutical therapies and wellness factors,” she says. She observes that the health-care market is constantly changing and hot trends inevitably morph into something new, all in an attempt to get healthy and address well-being.
Meanwhile, employers will most likely continue to offer health care benefits. “We believe the employer-based system will continue to be the predominant method of people getting their health care insurance coverage,” says Grenn. He adds, however, that employers need to take the initiative and drive change by demanding better quality from the health care system. “It’s a significant challenge, because most employers feel they haven’t had their voices heard,” he says. According to Grenn, employers want three things: better quality of care, improved outcomes and lower costs. “Everybody recognizes that we need to identify better ways to control costs and make it a better experience for people who need to use the system,” he says. It’s complicated, and finding solutions is difficult, but employers care about providing their employees with sustainable health care benefits in tandem with managing their businesses well, nonetheless.
Health care is a controversial and challenging issue, making its future unpredictable. “It’s like fixing something over and over again,” says Lee, who describes it as a huge old engine with lots of prongs, which will take a concerted effort by all the players to make it right. When that day will come is anyone’s guess. Meanwhile, employers are taking the old model, which was designed in a different era, and making improvements to meet changing needs and get it on track. It’s a wise strategy. Focusing on disease prevention and giving their employees opportunities to embrace good health is a sound investment for employers because it increases productivity and at the same time makes life better for everyone.
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