By Sean P. Johnson
The first line of PwC’s newest medical cost trend study says it all: American businesses are frustrated with rising health care costs.”
With all due respect to PwC, also known as PricewaterhouseCoopers, I’m not sure we needed a study to tell us that. If you as an employer were not already angry about the costs and challenges of providing quality health care to your employees, the second page of PwC’s “Medical Cost Trend: Behind the numbers 2020” will blow your blood pressure.
Medical costs are expected to escalate 6 percent in 2020. That may not be the worst part. The report notes that utilization is down – thanks to higher deductibles and more cost sharing – but higher prices continue to fuel increased health care spending. It’s not a recipe that makes employees, or their employers, happy.
Compounding the frustration is these price increases come at a time when employers are more actively involved in managing health care than before. Employers are inserting themselves into the delivery equation and exploring a wide-range of market-based solutions. But after a couple of flat years, the increases are trending up again.
Some are predicting employers might just give up if the trend line continues despite their efforts to control utilization.
“If market-based solutions don’t work, employers may push for health care to be regulated like a public utility,” Michael Thompson, president and CEO of the Washington-based National Alliance of Healthcare Purchaser Coalitions, said in an interview with PwC’s Health Research Institute.
I’m not so sure that’s the case. If 2020 indeed turns out to be a turning point in employer-sponsored health care, what we are likely to see is the acceleration of some recent employer steps to further contain costs while providing affordable, quality care for their employees:
- Direct contracts. By using tools such as NOVO Health’s Direct Medical Market (DMM), employers are able to redirect episodes of care to more cost-effective providers, delivering affordable care from the highest quality independent physician groups. The savings allow employers to financially incent their employees to choose these options, introducing consumerism into health care. (Employers such as Walmart have actually dictated which providers employees can use for certain episodes of care; see On the Radar, page 7.)
- Worksite clinics. The use of onsite and near-site clinics grew to 38 percent of employers in 2019, up from 27 percent in 2014. That number is expected to continue growing in 2020, and employers are adding primary care and other services in a bid to control cost trends. NOVO Health’s DMM can help here too.
Flexibility is the key, and as employers seek that flexibility, they are turning away from commercial insurance policies and using self-funding or level pay options that allow them, and their employees, more choices (see page 10). These options require some risk tolerance, but clearly tolerance for the status quo is waning and employers are becoming “activist.”
Plenty to think about as we finally get some nice summer weather. All too soon, the rush of renewals will be on for 2020.