BY BEN CONNER
Now that we are in the middle of another election cycle, politicians have once again pushed the health care industry into the national spotlight. Their primary message: Health care has become too expensive for businesses and their employees, and legislative changes are necessary to fix it. Although health care benefit costs increase by around 10 percent every year, the system is not broken. The system works exactly how it was designed to work. Once today’s business leaders embrace this fact, they can explore new opportunities to manage health expenses by analyzing the data attached to it.
Why the American Health Care System Is Not Broken
To understand any system, you must first examine its intent and purpose. The private health care system was designed to do two things:
- Provide services to customers who financially qualify
- Generate revenue for insurance providers, pharmacy benefit managers, and hospitals who are at the table making the agreements that employers sign up for
A single glance at the financial performance of major insurance providers, PBMs and hospital systems reveals that the industry does a remarkable job of generating revenue for these businesses. The reason the system feels broken is that employers, employees, and physicians feel the weight of increased health care premiums and lower payments for services provided every year as a result of system inefficiencies.
Even when lawmakers are successful in implementing changes in the consumer’s favor, the insurance companies come out on top. A recent example comes from the Affordable Care Act (ACA). The Medical Loss Ratio Provision in the ACA requires 80% of an insurance carrier’s revenue to go toward care for patients and allows the other 20% to go back into the company. When the insurance companies realized they could only have 20% of the pie, they made the pie bigger by increasing prices for consumers. Although this ACA rule was designed to benefit consumers, it backfired by creating misaligned incentives for insurance companies whose fiduciary responsibilities is to its shareholders, not its customers.
If businesses want meaningful change to their health care benefits, they cannot wait for the government or insurance companies to act. Instead, businesses can find success within the current benefits system by understanding how the system works and finding new strategic opportunities that lead to better outcomes for the business and its employees.
Adapting to the American Health Care System
Because the health care system has these misaligned incentives, business leaders are left with two choices:
- Choice One: Drive more efficiencies within the current system to manage price hikes. You remain locked into the same system that regularly increases prices without adding value, but you develop new strategies to chip away at those prices.
- Choice Two: Change the system you’re in. With a new approach to health care, you eliminate the price hikes and access better care for your employees. Though other companies endure annual rate increases, yours often hold steady.
Changing the system may sound difficult, but it’s possible. By taking a data-driven approach to health care, employers can design new benefits plans that provide access to better hospitals, pharmacies, and doctors while potentially lowering the overall cost of care.
We don’t suggest employers make drastic decisions all at once, but instead engage and embark on a journey of pursuing change for the better. Altering course and breaking free from the traditional health care model can happen one right decision at a time. After your business gains momentum in the right direction, you can slip into a new health care ecosystem that serves employees while managing costs and improving quality.
The American health care system is designed to financially benefit the businesses that built the system, but that does not mean the costs should be burdensome to your company and employees. With the proper strategy in place, you can access the same level of health care at a lower price.