Physician practices today face enormous hurdles as they attempt to navigate through the changing landscape of healthcare reform. Growing regulatory burdens and health insurance confusion mean physician practices are constantly trying to figure out ways to control costs. The Affordable Care Act’s (ACA) widespread impact ripples through all aspects of healthcare. As payers, providers and patients, physician practices see all sides.
The swarm of activity taking place in Central Florida’s Lake Nona and Medical City has shifted some attention from the area’s burgeoning hospitality sector to its growing medical sector. In the medical community, well-managed healthcare is just as important to employees as it is for patients. Even so, there are challenges to overcome.
For example, Medicare spendingi is projected to grow at a slower rate than in the past 10 years (3.3% annually compared to 6.1% annually). The lower projections for growth in spending per beneficiary are due in part to reduced updates of fee-for-service Medicare, lower payments to managed-care plans, and the recent slowdown in use of services. As a result, costs are being pushed to third parties for reimbursement.
And healthcare reform has added additional taxes that insurers must pay, which translates to higher premiums on fully insured group employee benefit plans. The tax portion between patient-centered outcomes research (PCOR) fees, transitional reinsurance fees and insurer fees add roughly 3% to 5% in cost on top of the normal trend increase. The ACA has also mandated the maximum in out-of-pocket costs. Also, co-pays, which previously did not apply to out-of-pocket costs, now apply. Ultimately, this makes any group employee benefits plan slightly or possibly significantly richer.
Depending on the current benefits program design, we have seen insurers add anywhere from 2% to 7% to the premium cost to account for the richer benefit. That adds up to anywhere from a 5.5% to 11% cost increase before any claims or trends are taken into account.
Insurance companies are highly motivated to control costs, too, and this creates a difficult road ahead for physician groups. That’s why it’s critical for physician practices to consider alternative funding arrangements. Most carriers (CIGNA, UnitedHealthcare, Aetna, etc.) are moving forms of alternative funding arrangements down to small groups, which would typically be community-rated. These arrangements reduce the premium tax burden, provide composite rates for a group that would have age-based or tiered rates, and provide actionable data to bring a real return on investment for health and wellness programs.
One thing to do now is to automate benefits administration. Not only is automation good for the employer, it’s great for employees. User-friendly tools engage and educate staff about benefits through an easy-to-use navigation portal. Now, a wealth of information is just a click away. Open enrollment and life event processing can be confusing and challenging for anyone. With benefits administration technology, employees can learn, view and then elect benefits specific to their eligibility. All transactions can be seamlessly transmitted to payroll, ensuring accurate payroll deductions.
More employers are also implementing consumer-driven healthcare plans (CDHPs), which increase out-of-pocket medical expenses for plan participants. The rise in CDHP use is prompting both employers and employees to look for ways to offset out-of-pocket costs.
To reduce costs, physician groups should set aside time to educate employees to make them better healthcare consumers. A well-designed campaign puts the responsibility of personal health and cost control in the employee’s hands. If an employee understands that premiums and overall insurance rates are based on utilization and claims experience, there is more of an incentive to get engaged. And who is in a better position to educate their employees about healthcare than a physician?
The decisions employees make about their health have a direct impact on the employer’s bottom line. Effective wellness programs help shift the responsibility for personal health and benefits utilization to the employee and, over time, reduce the employer’s overall costs. Proactive disease management and prevention, including health risk assessments, biometric screenings and employee education, should be a standard practice for physician groups. Employees simply need to be smarter about their decisions and physicians are perfectly aligned to serve as educators.
Just as physicians witness with their patients in the exam room, lifestyle choices also impact their employees. Four behaviorsii are identified by the Centers for Disease Control and Prevention as primary causes of chronic disease in the United States. These behaviors lead to a higher prevalence of diabetes, heart disease, and chronic pulmonary conditions:
- Poor nutrition
- Tobacco use
- Frequent alcohol consumption
Therefore, the cost-reduction potential is large for employers with well-established strategies around employee education, health and wellness, and employee benefits administration. To impact insurance premium costs, physician practices will have to look at managing their employees’ health risks in the same way they would manage risks related to Workers’ Compensation. This approach can reduce controllable risks and provide the best way to manage healthcare costs in the long run.