Woodruff Sawyer’s “Mission to More” series leads you through today’s Benefits news and serves as a guide for everything from competitive programs to compliance. In this second blog post, Marc Strickland demonstrates how both employers and employees can benefit from new price transparency regulations. These new rules will create a different paradigm, establishing an environment where engagement, literacy, and action are realistic outcomes.
As healthcare costs increase, how are employers and employees expected to keep up?
It’s no secret that healthcare premiums are on the rise. PwC’s Health Research Institute found that medical costs rose 7% in 2021 and are projected to increase 6.5% in 2022, compared to pre-pandemic increases of 5.5%-6.0%. In addition, the Kaiser Family Foundation (KFF) found that family healthcare premiums have increased 22% in the last five years and 47% in the previous decade.
Increasing costs prevent people from accessing healthcare. Nearly half of US adults did not get routine healthcare or dental care in 2021. Almost 30% did not take prescribed medication as needed and cannot pay for out-of-pocket (OOP) costs. Insured individuals find that they cannot afford OOP costs (47%), and more than a quarter (27%) do not have money to pay for their deductibles.
To offset increases, employers traditionally increased the employee portion of healthcare premiums, which have escalated 45% over the last ten years, according to Kaiser. However, given a competitive labor market and rising inflation, it isn’t easy to pass those costs on to employees because they simply can no longer afford it. As a result, employees seek employers who offer better salary and benefits packages.
We are now in a no-win situation where neither employers nor employees can take on additional cost burdens. We need a new paradigm that supports everyone in making cost-effective healthcare decisions that enhance lives. One way to make educated choices is to validate the price of services in advance—using tools that compare providers, services, and costs.
Price transparency sets the stage for lasting change
Unfortunately, financial surprises happen all too often in healthcare.
Case Study: Kaiser Health News reported that a routine appendectomy for a man in Charlotte, NC was far above the regional norm. The healthy, 28-year-old man received a bill with total charges of over $41,000. After insurance and deductible, he received a balance billing for $28,000. However, the Healthcare Bluebook, a source for pricing standard medical procedures, indicates that the fair price for an appendectomy in the man’s ZIP code is only $13,000—the amount of his deductible and insurance payment. After two years of fighting the charges and ruining his credit record, the carrier resolved the outstanding bill too late, after the harm had already been done.
Prices allowed by large employer plans vary within regions.
Case Study: In the Oakland, CA region, MRI claims were priced between $475 and $1,100, but the average price of this type of MRI was $853—approximately 144% higher than in the Orlando, FL region.
Negotiating prices is important, but understanding how price transparency affects employers and employee-consumers is critical.
|The Galen Institute noted that price transparency should focus on value in healthcare spending with four key benefits:|
These benefits reflect the purpose of the Transparency in Coverage ruling (also dubbed the “No Surprises Act”) by the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury. The act requires “…most group health plans, and health insurance issuers in the group and individual market to disclose price and cost-sharing information to participants, beneficiaries, and enrollees.”
By arming consumers and employers with transparent price information, the intention is to help people make more informed healthcare decisions.
|For example, Deloitte’s Hospital Pricing Specialists survey noted that 60% of consumers are more likely to choose a provider that published their services and local rates. In contrast, a Harvard study indicated that 75% of consumers do not know that healthcare pricing tools exist. How can employers help employees improve their awareness of existing pricing tools so they can start saving money?|
In the realm of groceries and homegoods, consumers are used to quickly accessing product, service, and price information via mobile devices, 24/7. Promoting healthcare pricing tools will improve adoption of these services for employees and their families. For example, employer awareness programs can make employees aware of existing apps, like drug-pricing tools, which are fairly common. These apps direct consumers to pharmacies and retailers that offer the best price. As employees increase their awareness of these pricing tools, they save money for their households and for their employer.
These tools support the efficacy of the No Surprises Act, which intends to help consumers find the healthcare services they need at a desired price, helping to relieve the entire burden on the employer and health plan to dictate where employees can go for care.
Employee awareness of price transparency requirements is the first step in empowering them to make quality, cost-effective choices. A KFF tracking survey found that the general population does not know that price transparency rules exist. For example, nearly 70% of people are unsure if hospitals must reveal price information, with only 9% understanding that hospitals are on the hook for sharing data.
But where should employers start?
Improving Health Literacy
Employers benefit from improved employee healthcare decisions. While tools are essential, basic healthcare education must take place. The combination of personal and organizational health literacy empowers people to make informed choices.
|Health.gov recently updated these definitions to include:|
Personal health literacy is the degree to which individuals have the ability to find, understand, and use information and services to inform health-related decisions and actions for themselves and others.”
Organizational health literacy is the degree to which organizations equitably enable individuals to find, understand, and use information and services to inform health-related decisions and actions for themselves and others.
As the healthcare system becomes more complex, literacy can be more challenging. Those individuals who are “health literate” have the skills to communicate clearly with providers, use math to do basic calculations, and even use health technologies that include monitors and devices. Unfortunately, over 90 million Americans have a low health literacy rate due to their socioeconomic status, advanced age, being financially challenged, or a lack of English language skills.
|The Partnership for Clear Health Communication showed that adults with low health literacy experience:|
Achieving organizational health literacy will require employers to offer tools and employee education to make informed decisions. The good news is that employers are now in a unique position to improve employees’ personal health literacy—an essential lifelong skill.
How do employees make healthcare decisions?
Once employees improve their health literacy, they are in a position to make informed healthcare decisions. The organization can also advance their health literacy by thoroughly understanding their employee pool and what tools, information, and resources they need.
For instance, one key driver of healthcare decisions is the age of the employee-consumer.
According to Deloitte, there is a generational shift in how patients access healthcare. Previous generations and earlier healthcare plans depended on primary healthcare provider referrals. However, digitally sophisticated generations want instant access to information replicating “the Amazon experience.”
|People want to compare providers and services and review prices in easily accessible formats, based on the following factors:|
The Deloitte survey indicated that approximately 40% of patients request a price quote before obtaining a service, 50% like the ease of getting a quote, and nearly two-thirds (63%) understand the US healthcare system.
It appears that employees who are technically adept and knowledgeable about the healthcare system are willing to use price transparency tools. Moreover, employers will benefit by offering price transparency tools to the workforce who desires them, helping everyone control costs while accessing appropriate healthcare.
Employers can now offer game-changing education tools
Employers that offer new price transparency tools empower employees to make informed decisions while saving money for their families and the company. Offering these tools adds to a holistic approach and helps the workforce expand their knowledge, manage their finances, and choose the proper care for their needs and budget.
Quizzify is a tool that improves employees’ healthcare literacy while helping them to lower costs. By partnering with the Harvard Medical School, Quizzify quickly engages employees to enhance their knowledge on everything from diagnostics to dental care and reveal the meaning behind the fine print in financial consent forms. Employees also call Quizzify a “gamechanger,” helping them improve their disease management acumen, negotiate medical costs, and arm them with advanced knowledge that saves thousands in healthcare costs.
Jellyvision’s ALEX platform is designed for employees to use their HSA accounts better. An estimated 20% of Fortune 500 companies use the ALEX platform to manage their healthcare dollars better, reducing the number of calls to HR to answer common questions. In addition, chronic disease management tools, benefits videos, and engagement tools help employers and employees improve their health literacy and save money.
As employers add tools, they need to avoid increasing HR overhead. That is why many of these tools come as part of a unified platform that makes them easy to administer. Paychex’s 2021 Pulse of HR Report uncovered that HR departments are looking to technology to improve benefits administration, engage employees, and do more with less. Over 80% of those surveyed felt that employee HR self-service tools were at the top of their initiative lists.
However, tools alone may not be enough to support every workforce. A high-touch, human-centered approach is also necessary to overcome employee fears, misunderstandings, and barriers to obtaining healthcare. HR, service providers, and benefits consultants support employee engagement. We now know that healthcare decisions require more than just information. Employees need empathy and personal attention in addition to knowledge.
We expect several new vendors to emerge that address the new requirements. Some will come from the traditional carriers, while others will be new entrants. However, all the vendors will need to focus on balancing information about prices while making it as simple as possible to access this information.
It starts with Price Transparency Act compliance
Both health literacy and price transparency tools must be easy to administer and adopt. In addition, the Transparency in Coverage rule requires plan sponsors and health plans to meet the following deadlines:
|January 1, 2022||Provide public, machine-readable files that include in-network rates, out-of-network allowed amounts, and prescription drug pricing.|
|January 1, 2023||Provide an internet-based, self-service tool that lists personalized, OOP cost estimates and other price-related information for 500 predetermined items and services.|
|January 1, 2024||Include all covered items, services, and prescription drug prices in the self-service tool.|
Plan sponsors and health plans shoulder the burden for compliance. If they have not done so already, these parties need to coordinate with medical and pharmacy plan issuers and obtain the data they need to remain in compliance.
As a result, some employers are now reviewing their contracts with medical and pharmacy providers to ensure they get the data they need to stay compliant. However, third parties are not responsible for compliance; health plans and sponsors remain on the hook for getting data and providing the necessary tools. The Price Transparency Act applies to both fully and self-funded organizations, requiring employers to be proactive to stay compliant.
Self-insured employers may achieve unique benefits. For instance, self-funded employers use this information to negotiate better contracts with carriers and networks or provide financial incentives for their employees to use preferred providers. In addition, self-insured employers will be able to compare prices across hospitals in their covered area—information they have not had access to until now.
What Employers Should Do Next
Stay focused on the big picture. Price transparency helps employees and their dependents make better health choices, reducing costs for all parties. Consumers exert power in the marketplace when they choose high-quality, cost-effective providers. Price transparency and health literacy empower employees, lower costs for employers, and create competitive pressures for providers and pharmacies.
Create an expert team. It will be challenging for employers to navigate these changes alone. Understanding existing health plan design, compliance requirements, and local market offerings is imperative to developing a transparent and compliant health plan that employees understand and use. Digital health companies and technology providers are also part of the team, as employers design the right self-service tools that balance HR efficiency and employee adoption.
Engage employees for greater health literacy and tool adoption. The workplace is more diverse than ever, and benefits engagement must reflect the workforce’s needs. While many employees will adopt new price transparency tools, others will need time to improve their health literacy. Some employees will need basic literacy education, while others will quickly adopt mobile, desktop, and print tools along with one-on-one human advice to help them make the right choices; employers who invest in the latter approach improve adoption and ultimately empower employees to make the right choices.
Stay Ahead of the Curve
The Price Transparency Act requires employers to integrate new tools into their benefit offerings. Still, it is the first step to move beyond the status quo benefits administration approach. Empowering employees occurs on many levels, and Woodruff Sawyer provides the expertise to help employers stay ahead of the curve.
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