Employers often look to price transparency to help improve coverage and contain costs. With employee medical claims and insurance premiums at an all-time high, many employers are going into negotiations compelled to rein in health care expenses.
The recent price transparency rule and ongoing industry scrutiny give employers the push they need to access better healthcare deals. Many use this data in their discussions with pharmacy benefit managers (PBMs) and insurers to better control costs and secure reliable, comprehensive healthcare coverage for their workers.
Employers are Facing Challenges in Finding Affordable Healthcare Benefits
Mercer reports that employers face the largest annual increase in healthcare costs in over a decade. This cost growth of 5.4% suggests that labor shortages in the healthcare industry and high inflation in 2022 have driven healthcare costs to climb even higher.
In addition to increasing overall costs for organizations, rising premiums also put financial strain on employees. Findings from the Commonwealth Fund 2023 Health Care Affordability Survey revealed that 43% of employees with employer health coverage found it very or somewhat difficult to afford their healthcare.
Empowering Employers with Data Transparency
Today, many businesses face challenges that make delivering in-demand health and wellness benefits more difficult. However, the rollout of various transparency laws over the last few years has given employers the leverage they need to make more informed decisions when purchasing health plans.
With access to greater transparency, employers are leveraging their ability to identify variance in billed charges, negotiated rates, and permissible amounts between payers and healthcare facilities. Transparency data also gives employers valuable insights that help them choose health plans that offer an appropriate balance of coverage and cost.
The Growing Demand for Better Healthcare Deals
Healthcare benefits price transparency is setting the stage for lasting change. As one of the largest purchasers of healthcare in the U.S., employers are at an advantage when it comes to negotiating healthcare deals.
Employers recognize that they have a fiduciary responsibility to their employees and how their decisions impact their workers’ finances. To fight back against skyrocketing healthcare costs, many employers hold the industry accountable and work with employee benefits consultants to broker new healthcare deals.
Taking a Closer Look at PBM Contracts
Many employers are examining PBM contracts more closely as part of their drive to use price transparency to negotiate better healthcare deals. Several groups, including the National Alliance of Healthcare Purchaser Coalitions and the Purchaser Business Group on Health, have provided information on contracting standards they encourage employers to demand during negotiations with PBMs.
While it is a gradual process, changes have been made to cut healthcare costs. When more focus is put on how rebates are shared or how drugs are listed on formularies, companies are able to reduce drug costs.
The Urgent Need for Cost Control
The U.S. has one of the highest healthcare costs in the world. Although the COVID-19 pandemic exacerbated this rising healthcare cost pattern, this problem existed long before COVID-19 began. However, it was not until price transparency laws were passed in the last couple of years that employers discovered how big of a problem it is.
Two out of three U.S. employers plan to prioritize controlling increasing healthcare benefit costs over the next three years, according to a recent Willis Towers Watson (WTW) survey. Faced with the reality of even higher healthcare costs in the future, many employers are exploring alternative ways to provide employees with the coverage they need.
The Rise of Self-Insured Plans
Approximately two-thirds of the employer health insurance market is in self-insured plans, according to a report published by the Kaiser Family Foundation (KFF). These plans are most common among larger companies that choose to directly collect premiums from enrollees and accept the responsibility of paying the medical claims of covered employees and dependents.
Self-insured healthcare plans empower employers to control their employees’ healthcare by assuming claims risks themselves instead of paying fixed premiums to an insurance company.
Transparency Rules Benefit Self-Insured Employers
Many self-insured employers are finding that they too benefit from transparency rules. With the ability to closely analyze negotiated rates between insurers and providers, self-insured employers can reevaluate their own pricing.
Previously, self-insured employers were forced to lean on health plans to manage their benefits pricing, claims, and provider networks. With price transparency, they can stay better informed of actual prices, which may incentivize them to look at direct-to-provider contracts.
Challenges in Current Arrangements
While self-insurance does allow employers to save money by eliminating state insurance premium tax costs, this type of health plan has drawbacks. With the rollout of federal price transparency rules, many employers realize that their self-insured arrangements are not working in their favor.
Some employers have discovered that many health insurance carriers have privately negotiated more favorable prices with health systems for their own Medicare Advantage health plans and substandard prices for their self-insured business customers.
The Role of Medicare Advantage
Medicare Advantage Plans, also referred to as “MA Plans” or “Part C,” are health plans approved by Medicare and offered by private companies. Health insurers can receive more attractive prices from hospitals for patients covered by Medicare Advantage as this decision comes with a promise to bring self-insured employers along at a higher rate.
However, due to varying benefit offerings and provider networks, it can be difficult to accurately compare Medicare Advantage plans with plans in the commercial market.
What Is the Medicare Advantage?
Medicare Advantage is a type of “bundled” plan and an alternative to Original Medicare. These plans must provide patients with the same benefits as Medicare Part A and Medicare Part B, which cover hospitalization and doctor’s visits, respectively.
Eligible employees who take advantage of Medicare Advantage can benefit from plans with zero to low monthly premium costs, manageable co-pays, and no deductibles. Coverage typically includes other perks at no additional cost, such as dental services, prescription drugs, transpiration services, hearing aids, and over-the-counter healthcare goods.
Unfortunately, KFF reports that gaps in Medicare Advantage data limit transparency in plan performance, ultimately impacting beneficiary decision-making.
Comparing the Advantages of Medicare Advantage
There are several key advantages of Medicare Advantage, including all of the benefits of Original Medicare Parts A and B. But unlike Original Medicaid, in which a separate prescription drug plan must be purchased, Medicare Advantage includes prescription drug coverage all in one easy-to-manage plan.
It also covers some items that Original Medicare does not cover, such as routine vision, dental, and hearing care. In some areas, gym memberships are even covered through a SilverSneakers benefit. Enrollees can also enjoy the security of an annual maximum out-of-pocket limit.
Contact New City for Quality Employee Benefits Plans
With higher healthcare costs on the horizon, employers are always looking for more ways to save. The team at New City Insurance has extensive experience assisting employers with their health and wellness needs by building custom plans with all major carriers. For more information about how we can help maximize your employee benefits cost savings, contact New City at 888.210.2765.