Like non-healthcare employers, healthcare employers are adapting to and strategizing for increasing healthcare costs. Unlike non-healthcare employers, the recent modest growth in insurance premiums in employer-sponsored group plans has more impactful consequences for the healthcare employers’ bottom line.
“At the academic medical center, stand-alone facility and large integrated health system, they’re all dealing with this balance between designing their medical plans and their cost sharing, along with population health management,” said Judy Thorp, managing director for human resources practice at Huron Consulting Healthcare.
[See also: Cost sharing may not cut health costs]
Premiums have been held in check in part by a weak economy and stepped up cost sharing by employees, whether through high-deductibles, co-pays or co-insurance, but they’re still going up.
According to a recent survey from the Kaiser Family Foundation, annual premiums for employer-sponsored family health coverage held to the recent moderate trend, climbing to $16,351 this year, or 4 percent more than last year. Workers paid $4,565 on average toward the cost of their family’s health coverage, but their wages did not rise to keep up with even the modest rise in premiums, said Drew Altman, Kaiser Family Foundation president and CEO.
“Year after year premiums have gone up when wages have flattened or declined and they [employees] pay other forms of cost sharing. People still feel the pain of healthcare costs and worry about paying for health insurance,” he said.
Employers are moving more costs to employees, which takes a bigger bite out of their finances. This year, 78 percent of all covered employees face an annual deductible (up from 72 percent in 2012), the survey said. Deductibles of at least $1,000 are common in employer-sponsored plans. Workers typically must pay this deductible before most services are covered by their health plan.
Healthcare organizations are part of this trend, moving to where the employer is responsible for 70 percent of insurance cost and employees pay 30 percent, Thorp said.
“But being a provider of healthcare throws a much more difficult situation into the mix. They have their own employees who are going to their specific facilities for healthcare,” she said.
When employee cost sharing escalates, it shows up as an increase on the charity care line of the provider’s financial statement. “If you pull one lever, you have got to look at it holistically and see where else it could show up or have consequences,” Thorp said. “Clearly, it’s going to be on that charity line.”
Healthcare CFOs are concerned about seeing the charity care line on their financial statements increasing. “As a result, we are seeing policies on collections and billing being reviewed and modified so that the charity care line doesn’t just absorb many employees’ cost sharing increases,” she said.
Increased cost sharing should not make collections more difficult if the healthcare organization “has tight internal controls around their billing and collection processes as it pertains to their patients as well as employees who use their facilities,” Thorp said.
At the same time, employees of healthcare organizations generally have higher utilization of their employer’s facilities, such as the emergency department, than typical corporate employees because they are onsite and have quick access.
Providers need to educate their employees and design their health plan to encourage use of less pricey facilities, such as an onsite clinic for employees or urgent care center nearby with convenient hours, she said.
Like other employers, providers are beginning to use carrots and sticks to encourage their employees to take more control of their health to curb costs, including enrollment in wellness programs.
Healthcare organizations are also watching as large employers are cutting costs and risk in other ways – by moving retirees older than 65 out of employer-sponsored group plans to the Medicare and Medicare Advantage individual market, a recent Aon Hewitt survey showed.
Some larger employers are also redesigning their plans, such as Memphis-based FedEx, which will offer only a high-deductible plan starting in 2014.
“As you see changes with large employers in corporate America, that is setting the tone for what the impact will be on healthcare organizations as well,” Thorp said.