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In 2021, employer health plan costs are expected to rise 5%, raising the red expense bar yet again in the ongoing saga of increasing health care costs. As employers contemplate managing expenses and cash flow, those with self-funded health plans have an opportunity to consider creative problem solving by reaching out to their community’s health care providers.
Year-after-year rising health care costs impact employer health plans. Large employers expect their health care benefit costs will surpass $15,000 per employee in 2021, affecting employers and employees. On average, employers will cover nearly 70% of costs while employees will assume about 30%, around $4,500 for an individual and more than $6,000 for family coverage. In recent years even as American salaries have risen, net pay for many has remained flat because of increasing health insurance costs.
What’s the cause? Many factors are attributed to ever-increasing costs in the complicated American health care system. Due to a lack of set prices for medical services, providers are free to charge what the market will bear. The amount paid for the same medical service can vary significantly depending on the geographic area and payer (private insurance, Medicare or Medicaid).
A 2019 HealthAffairs study reports that hospital prices are the main driver of health care spending inflation. For inpatient care, hospital prices grew 42% from 2007 to 2014, while physician prices rose 18%. Similarly, for hospital-based outpatient care, hospital prices increased 25% while physician prices grew 6%. Yet, hospital margins remain thin, and the model of fee-for-service is changing as the Affordable Care Act encourages more value-based models of care that focus on driving quantifiable positive outcomes for patients, such as limited readmissions and higher patient satisfaction.
Balancing hospital revenues and employer costs is not an easy issue to solve and can even be adversarial. But not all hope is lost. Hospitals are profit centers after all with a customer base to whom they want to provide value, and they are also significant employers in their communities — facing similar hikes in employee benefit costs to their bottom line.
And perhaps that common ground is the opening for employers with self-funded benefit plans?
Self-funded employers may have more leverage and negotiating power to reduce their health care spending in their communities than they realize. According to the Kaiser Family Foundation, more than 60% of Americans with employer health benefits are covered by self-funded plans. In an individual community that can translate into a large segment of the population that no health care provider will want to ignore.
Even if an employer has large market share, employers coming to the negotiation table will want to emphasize the benefits a mutually beneficial relationship will offer the provider. Implementing these tactics may improve employer-provider relationships, improve outcomes for employees, and ultimately reduce employer and employee health care costs:
An employer’s insurance broker can play a significant role in fostering employer-provider relationships and delivering mutually beneficial solutions in several capacities:
In the complicated world of health care, employers that build strong ties with their brokers and community health care providers can help everyone achieve common goals: high-quality care, lower costs and positive health outcomes.