If the Affordable Care Act has done nothing else, it has created the perfect conditions for health systems and employers to team up for mutual benefit. Uncertainty and confusion about the law and its effects have more employers exploring alternative arrangements to provide affordable health insurance coverage for their employees.
For the first time in decades, cracks are appearing in the traditional fully-insured model of healthcare coverage. The time is ripe for health systems to jump into the gap with an old approach delivered a new way – direct contracting.
Once the purview of the largest integrated delivery networks, direct contracting with employers can now be undertaken by health systems large and small thanks to new innovations in health plan offerings. It’s a development that both employers and providers should welcome. A 2012 Oliver Wyman survey of employers revealed that 40 percent were interested in contracting directly with provider organizations for a value-based network – a stunning number considering employers’ long reliance on traditional insurance.1
For their part, providers are drawn to direct contracting because it allows them to gain access to the purchaser directly and can eliminate the costs of contracting with a traditional payer. Yet only the largest health systems have been willing to add the requisite financing arm, which creates profound strategic and operational challenges and requires the system to step outside its core competency. If acquiring or starting a health plan were easy, every health system would be doing it.
Fortunately, forward-thinking health systems can take advantage of a new trend: offering a health plan directly to employers in their community without having to acquire a plan or buy actuarial expertise. New “employer health ownership plans” enable health systems to private-label a health plan that gives local employers of all sizes ownership of their own healthcare costs. By encouraging wellness, emphasizing high-quality primary care, and incorporating a self-insurance model, these plans give employers a share of the savings if their employees stay healthy.
Direct contracting made easy
Self-insurance is not a new idea. Small- and medium-sized employers have long envied the ability of larger companies to self-insure, but have lacked a well-constructed plan to help manage the associated risk. The employer health ownership approach is the first to make self-insurance feasible for smaller employers by creating a formula to control that risk.
The plans establish comprehensive access to primary care, prevention, and population health management that larger employers have used successfully. By creating an environment where employees are aware of their own personal health conditions and are given access to the physicians and drugs needed to manage those conditions, risks are minimized and monitored.
The plans also establish a far more direct relationship between employers and the health system’s network of primary care providers (PCPs). Rather than pay insurance premiums for primary care, employers pay the plan a fixed per-employee/per-month fee that goes directly to the PCP. And unlike traditional capitated payment arrangements, employer health ownership plans align reimbursement with quality care by incenting positive patient outcomes and tracking physician performance against common quality measures.
Because PCPs receive revenue through a fixed, monthly fee, providers enrolled in one of these new plans can focus completely on delivering value rather than maximizing volume. By reducing the burden of insurance administration on PCPs, this approach frees up more time for them to practice medicine. At a time when the Affordable Care Act is increasing pressure on providers for ever-shorter patient encounters, employer health ownership plans provide an escape from the standard 15-minute visit. And because the plans pay for all forms of patient contact, not just office visits, care can be provided in the most efficient and appropriate venue, including telephone or email.
For healthcare needs that are not met within the primary care setting, employees enrolled in one of these new plans have insurance for expenses that exceed an appropriate deductible. This insurance covers specialist and hospital care from providers within the health system’s network.
So the benefits of an employer health ownership plan run to all participants. For employees, the plan’s flexible payment structure provides extensive access to primary care services with no copays or coinsurance for most services—eliminating financial barriers to seeking primary care. Employers benefit financially when employees stay healthy, and can use the plan to directly incentivize employees to meet adherence and wellness goals. Primary care providers are free to focus on the employee’s long-term well being without worrying about whether he or she needs to see 15 more patients to make ends meet. And finally, ¬¬health systems benefit from the plan by firmly establishing themselves at the center of the care relationship in their community.
After all, building strong relationships with purchasers of care is a critical component of success in an increasingly competitive market. By contracting directly with employers in their communities, health systems can reduce employers’ costs and become the go-to provider. In so doing, health systems take control of their own future in an uncertain reimbursement environment.
NOTES
[1] Kairey, Mindy and John Rudoy. Employer-Sponsored Healthcare: What Happens Now? The 2012 Survey on Employer Health Benefit Plans and Preferences Conducted by the Oliver Wyman Health & Life Sciences Practice.