Why Employers Should Consider Adding Value-Driven Health Plan Benefits

Value, transparency keys to approaching healthcare plans differently

In the U.S., 66.5% of household bankruptcies are due to medical expenses. Employers report employees are tapping into their retirement savings to pay for family members’ medical costs. In a country where nearly 50% of employees are on an employer-funded plan, the U.S. healthcare system is faulty and begging for change.

The government is attempting to address the issue of out-of-control healthcare costs and while this is a promising sign, many employees need solutions now. Legislation like the No Surprises Act, which aims to safeguard consumers from unexpected medical bills and prohibits providers from balance billing patients for out-of-network charges, among other protections, is shining the light on the burden of unexpected costs.

Healthcare costs are projected to increase by 6.5% increase in 2022, according to PWC’s Health Research Institute. SHRM (Society for Human Resource Management) SHRM data shows in 2021, small-group health insurance is averaging a renewal increase of 7.66% year-to-date as of June 1 and some industry forecasts see costs doubling in less than 10 years. It’s an unsustainable cycle with costs going up while inflation impacts revenue.

Options are available to employers during this Open Enrollment season to offer help and hope with their employee healthcare benefits. As employers look for a different way to approach healthcare, the marketplace is responding. The model of healthcare where consumers don’t know what costs to expect or what they are paying for is outdated. People understand the impact of healthcare costs and realize it is one of the only services we blindly buy without price comparison - because the information is so difficult to find.  

One alternative for employers to consider is a Value-Driven Health Plan (VDHP), which can be added to existing healthcare benefits. They offer transparency and accountability, as well as metrics related to quality and pricing before a procedure. Most VDHPs have the information easily available on a mobile app or website.

Employers and their members want benefits that are seamless to use and increasing member engagement is an important component of a VDHP. In addition, with transparency built into the plan, VDHPs share quality and accountability data, through user-friendly technology tools. Providers and employers alike enjoy having visibility into their usage and the data.

Unlike a traditional PPO, where it’s a top-down approach to healthcare - meaning bill charges start at the top, then discounts are applied, and the plan pays the charges - VDHP plans use a bottom-up pricing strategy. It starts by looking at available data such as what Medicare would pay for the same charge at a facility, and other pricing metrics like what the facility charges for a service or procedure. Then a percentage is added (typically 140% over Medicare) which sets the reimbursement threshold for what a plan is willing to pay for a service, like an MRI. Once the parameters are established, users have an expectation of cost ahead of time.

VDHPs can be run in tandem with an existing self-funded employer and health plan. Members don’t notice a difference, as they still have one health insurance card, but they may have a PPO network for the physicians’ cost while ancillary costs and the facilities charges are run under Medicare Plus. VDHPs can also be managed under Medicare Plus for all charges if an employer chooses.

Making decisions before their care decisions is an important way to help members and employers realize the savings – essentially paying less for the same service.

Many employers are realizing 20-30% savings off current medical spending with a VDHP. On average when an employer adopts a VDHP plan, they are experiencing a reduction in their overall medical spend, including lower deductibles, copays, and contributions when compared to traditional insurance carriers.

For example, an employer that has 100 employees participating in their health plan will likely have claims expenses of at least one million dollars. A VDHP can reduce those costs by $200,000 to $300,000. For many self-funded plans, where employers are responsible for all costs for health claims beyond what employees pay under the plan, this represents significant savings.

The goal of a VDHP is to marry the tools and the services with the transparency surrounding quality and price. Employers care about giving the best experience to their employees. It’s not always about the lowest price, but a VDHP provides the data necessary to make more informed decisions.

KinderCare Education decided to offer employees a Value-Driven Health Plan option, as a cost savings move, when costs continued to increase under the previous medical plan, which used a traditional model.

“We are proud to partner with HST to disrupt the high cost of healthcare for our employees and our company.  HST’s collaborative approach to reference-based pricing ensures providers are paid fairly for providing quality services to our employees, and our employees are not overcharged. In some cases, this approach takes more effort for our employees to navigate, but the innovation and savings are well worth it,” said Tracy Kofski, CCP, CBP, GRP, KinderCare Education, vice president, Total Rewards.  

The benefits for employers are two-fold: offering a cost-efficient option with transparency and quality locked in for employees and having a better idea of expected healthcare benefit costs for the future. “We’d love more employers to implement the HST reference-based pricing model, as that would help more providers become familiar with this approach, making the savings for quality services be easier to access for all,” said Kofski.

While navigating the healthcare system is complex and finding transparent pricing is even harder, members are showing more interest in shopping around for healthcare. A growing number expect information to be available on an app or website. In fact, 76% of consumers with employer-based insurance said they were willing to use a doctor’s or health system’s mobile app, according to the latest research from PWC. Health systems are investing in digital technology to build better bridges with patients and drive growth.

The days of opaque healthcare pricing data for consumers not having the information they need when shopping for healthcare may be numbered. It’s hard to decide which specialist to see, without being able to compare the same data on each provider or facility. Alternative plans empower employers with new tools to help their employees with this challenge.

Finding a solution that helps members, while working in partnership with providers and healthcare organizations, is the key to saving money while not sacrificing quality.

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