Health Benefit Plan Sponsors Focusing on High-Cost Claims

Plan sponsors are considering changes to health plan design as well as health care delivery models, with strategies to address high-cost claims in mind.

Of the health care initiatives large employers participating in the National Business Group on Health’s (NBGH) latest Health Care Strategy and Plan Design Survey cited, implementing virtual solutions (51%) and developing a more focused strategy to address high-cost claims (39%) were at the top of the list.

This was followed by expanding centers of excellence (COEs) to include other conditions (26%) and implementing engagement platforms that aggregate top solutions (26%).

According to the survey, large employers are predicting that for 2020, their health care costs will increase a median of 6% without any cost management adjustments. Taking negotiations and other initiatives (e.g., alternative delivery models) into account, employers are expecting a 5% increase. While this constancy in health care cost trend provides some level of predictability to employers, it is still a sizable increase in health care budgets, well above general inflation and representing millions each year for the average large employer, the NBGH says.

Eighty-five percent of surveyed large employers cited musculoskeletal conditions (MSK) as their first, second or third most costly condition group. Cancer is the most expensive disease group for 26% of large employers. Diabetes and cardiovascular conditions are also driving costs. This data supports the need for large employers to take creative approaches for specific disease classes, such as by offering a COE program and procuring a condition management solution.

Increasingly, employers are working with partners to develop innovative solutions and address emerging challenges. Another reason for increased reliance on partners for 2020 is necessity, especially in the area of high-cost specialty therapies. Some therapies already on the market are in excess of $1 million per patient, and it is likely that new drug therapies will cost even more. As a growing number of high-price drugs from the pipeline are approved, the need to work closely with partners on how to finance and manage these therapies will only increase, the survey report says.

Curating a COE network is a common strategy for employers aiming to improve the quality of care delivered to those with a specific condition or disease. In 2020, 27% of large employers will expand their COE offerings to address additional conditions. Orthopedic procedures and musculoskeletal claims are the top driver of health care costs and continue to be one of the key areas of health care waste and overuse, the survey finds.

In addition, a growing number of employers are turning to COE models for fertility and maternity programs (38% and 17%, respectively); 10% are deploying a COE for transgender health.

Strategies to bolster employee utilization of COEs include requiring/mandating the use of a COE for certain conditions; reducing or eliminating the employee cost share; or requiring or incentivizing the use of second-opinion services (which would help the employee find a COE if s/he ended up needing care).

Requiring COE coverage is standard for typically carved-out benefits like bariatric surgery and infertility services. The exception to this rule is transplants: Because they require highly specialized care, these procedures are historically sought and covered at a COE facility.

In 2020, 31% of large employers will offer an accountable care organization (ACO) and/or high-performance network (HPN) either through a direct contract in select markets or via their health plan(s). This number has remained relatively stable from 2019. As ACOs mature to show positive results in both patient outcomes and cost management, more employers may consider making them a predominant focus of their health care strategy.

According to the survey, interest in virtual solutions continues to grow. This year, 63% of employers said that they expect virtual solutions, in areas ranging from mental health to musculoskeletal problems to telehealth, will have a very significant or significant impact in the future. In 2019, employers solidified their virtual offerings in the areas of telehealth for acute problems (98%), mental health (73%), weight management (55%) and diabetes management (44%). Looking ahead to 2021-2022, 38% are considering adding virtual care for musculoskeletal services and prenatal care (29%), as well as broadening telehealth to include specialty services such as dermatology (32%).

The NBGH also finds, this year, the use of tools and programs such as second-opinion services, advocacy support and online decision-making continues to grow. There was an increase in the use of medical decision support and second-opinion services from 2019 to 2020 (71% vs. 78%), and the use of advocacy support (65% vs. 73%). The use of high-touch concierge services increased significantly (39% vs. 60%), reflecting the need to simplify the consumer experience and help employees navigate the health care system.

The cost of specialty medical treatments is escalating at an unsustainable rate—typically a double digit percent increase year-over-year. Even worse, large employers with self-funded plans are footing the bill for newer high-cost treatments, some in the millions per treatment. Employers have many concerns related to high-cost treatments: the million-dollar price tags and the speed at which the treatments come to market, which can call into question the rigor and timeline of clinical trials. What’s more, an increasing focus of the research and development pipeline is on treatments for narrow subsets of patient populations with rare diseases—making this an exciting time in health care when patients with certain illnesses, sometimes terminal, are able to receive treatments or even be cured, the report notes.

However, as a result of the pipeline of treatments for rare diseases, large employers are increasingly focused on the impact of even one or two cases on their overall annual health care budgets. For example, Zolgensma, a one-time injection to treat spinal muscular atrophy in young pediatric patients, was launched in May at a $2.1M price tag, sending employers into action mode to uncover ways to finance such therapies.

In 2019, about one-quarter of employers are delaying the inclusion of new treatments from their formulary at launch (e.g., for 6 months) to enable the pharmacy benefit manager (PBM) or health plan to better determine the treatment’s efficacy and safety. The other two options—stop-loss insurance and outcomes-based contracting—aren’t as popular an approach, but are being considered heavily for 2021/2022.

In 2018, a majority (56%) of large employers voiced skepticism about the proposed health plan–PBM mergers. Specifically, they were unsure if these newly formed relationships would lower cost, improve quality and curate a better consumer experience. As a followup to that survey question, this year’s survey dove into whether employers are “voting with their feet” by going out to bid in direct result of mergers between health plans and PBMs.

The survey finds 16% of surveyed employers are issuing a request-for-proposal (RFP) due to health plan–PBM mergers. Another 30% are considering doing so in 2021-2022. These numbers are an indication that consolidation is having a profound effect on the health care industry, which could result in a plan change—health plan or PBM—for a number of employers, the report says.

The full report is only available to NBGH members, but an executive summary of the findings is available here.