Employers at the Tipping Point? Value, Risk-Sharing and Affordability in Health Care

Independent health insurance brokers offer a sobering take on the not-too-distant future: The skyrocketing cost of health insurance is pushing employers toward a tipping point, beyond which they no longer will be able to offer traditional health insurance. And high drug costs are a primary ingredient of this rocket fuel.

The insights came at the Ohio Association of Health Plans’ (OAHP) recent Annual Conference and Trade Show, where a panel of three leading private brokers addressed the challenge of affordability.

With health care as an enormous expense for employers, addressing its cost is critical to Ohio businesses remaining competitive, according to Kurt Lewis, chief executive officer of UnitedHealthcare of Ohio and moderator of the panel. The brokers on the panel agreed that taming the cost increases that are breaking budgets likely will require systemic changes, including persuading employees to approach their health care more as consumers and getting insurance plans to share the risks of the most expensive potential claims.

Getting health care consumers to really evaluate value isn’t easy, according to Bill Fisher, director of group benefits with The Oswald Companies brokerage in Cleveland. “Health care is personal,” he said. Most employees would likely come out ahead with a high-deductible plan with lower premiums, but few are willing to accept the uncertainty. “Many prefer the security knowing that when they have a need, they’ll have a fixed-cost copay. We’re trying to educate employers and employees on this, but we’re still not getting the broad adoption” of lower-cost, higher-deductible plans.

Still, the move toward self-funding — 90% of Ohio employers with 500 or more employees are self-insured — is beginning to force the issue among employers, said Valerie Bogdan-Powers, president of the Cincinnati-based firm Horan. “The main thing we have to tell employers (who opt for self-funding) is ‘you now own your costs,’” she said. Only since then has she seen bargaining agreements with cost-saving measures such as requirements for checkups.

Another current Horan client, a major university system, has begun offering a less expensive plan with a narrower choice of providers.

All of the brokers present agreed that prescription costs threaten to sink the health care system. Horan’s data indicates that 51% of its clients’ drug spend goes to 2% of their population. Looked at another way, the top 10 specialty drugs account for 30% of drug spend while the top 10 non-specialty drugs account for less than 1%.

Scott McGohan, chief executive officer of Dayton-based McGohan Brabender, sees “raw transparency” as counterweight to unreasonable drug prices. Fisher agreed that “Transparency can help, if we figure out how to use it. It helps everybody understand the true cost — nobody has a sense of the true drivers of cost.”

Ultimately, the three agreed, employers and health plans may find it impossible to manage the rising cost of care, especially ever-costlier new therapies, alone. Said Fisher, “Unless there’s meaningful risk-sharing among plans and systems, you can’t deal with the extraordinary cases.”

Bogdan-Powers echoed the thought, addressing the OAHP audience: “We’re about to see amazing gene therapies that people can’t afford. There’s an opportunity for people in this room to come together and take out the silos.” Otherwise, she said, it’s like a dangerous game of chance — “Someone’s going to spin that wheel and get that $3 million claim.”