Lower Healthcare Costs: Give Employees a Reason to Choose High-Value Care

Lower Healthcare Costs: Give Employees a Reason to Choose High-Value Care. A lower-cost option isn’t necessarily a better option if employees have no reason to choose it.

In our most recent edition of Benefits Architecture: Learn the Framework. Elevate the Design, we discussed how DirectPath can give employers an opportunity to reduce costs and gain greater control over their health plan. And with healthcare costs continuing to rise, finding opportunities to purchase quality care at a lower cost has become increasingly important.

But securing a lower price is only part of the equation.

If employees continue to use higher-cost providers because the plan gives them no reason to consider another option, the savings opportunity can be difficult to achieve. That’s where plan design can play an important role. Employers can use a portion of the savings created through direct or bundled arrangements to make high-value care more attractive to employees — an approach where both the employer and employee can benefit!

Options are available.

Take a total hip arthroplasty as an example. Suppose an employer has access to two options for the same procedure:

Hospital: $43,577

Independent surgery center: $25,500

The $25,500 bundled price at the independent surgery center includes the major expenses associated with the procedure, including the surgeon, anesthesiologist, facility and other applicable costs. That creates a potential difference of $18,077. For the employer, that’s a significant opportunity to reduce costs.

But employees may see the situation differently. If their out-of-pocket costs are the same at either location, they may not see a reason to choose the lower-cost facility. To help encourage employees to choose the higher-value option, employers can offer a financial incentive.

For example, let’s say the employer’s medical plan has a $2,000 single deductible and a $4,000 single out-of-pocket maximum. If an employee is facing $4,000 in out-of-pocket costs for a procedure, the employer could waive some or all of those costs when the employee chooses the designated independent surgery center.

Here is what that might look like:

$18,077 gross savings to the plan

− $4,000 waived member responsibility

= $14,077 net savings to the plan

This is where the savings work harder: The employee benefits from a lower out-of-pocket cost. The employer keeps a meaningful portion of the savings. And the provider receives a fair, predetermined payment for the care. Everyone has a reason to choose the better-value option.

Remove other barriers.

Cost isn’t the only consideration. What if the independent surgery center is over 40 miles away from the employer’s community? For someone preparing for a major procedure, taking extra time to travel to a facility may discourage them from choosing it.

However, if their employer offered travel assistance, the employee may be more willing to make the trip. For example, suppose the employer provides up to $1,500 in travel reimbursement.

The calculation now looks like this:

$18,077 gross savings

− $4,000 waived member responsibility

− $1,500 travel reimbursement

= $12,577 net savings to the plan

The employee receives significant cost savings along with support for the additional travel, while the employer still saves more than $12,500 on a single procedure.

Unlocking greater value.

Now consider what happens when the strategy is applied repeatedly. If 10 employees use the selected provider for the same procedure over the course of a year, the savings could be 10 times greater.

That’s more than $125,000 in potential annual savings from one type of surgery.

And hip replacement is only one example. The same approach can be considered for joint replacements, spinal procedures, general surgery, diagnostic imaging, laboratory services, physical therapy, infusion services and more. The more this strategy is used, the greater the impact on the plan’s costs can be.

Knowing the numbers creates opportunities.

Employers spend millions of dollars on healthcare each year, yet many don’t have a clear picture of what they are paying for individual procedures, why they are paying those prices or whether better alternatives are available.

This is why employers need to ask tougher questions: “Where are we paying more than we should for healthcare, and what could we do with the savings if we changed how we purchase it?” And then: “How can we give employees a financial reason to participate in better healthcare purchasing decisions?”

Direct contracting can help employers secure better prices, while thoughtful plan design can give employees a reason to choose high-value providers. When both work together, employers can lower plan costs while helping employees save as well.

If your current benefits strategy isn’t looking for opportunities like these, maybe it’s time to ask why. 

Don’t hesitate reach out today to discuss your benefits needs.

Cost figures, coverage details, and plan design elements presented in this blog are for illustrative purposes only and do not reflect any specific insurance policy or provider. Actual costs will vary based on your organization’s health plan, the insurance carrier, provider contracts, and the specifics of each medical situation. Employers and employees should refer to their official plan documents or speak with their broker or benefits consultant for guidance if needed.