Mark Lutes Discusses Employer Demand for Increased Member Cost Sharing in MCOL ThoughtLeaders

MCOL ThoughtLeaders August/September 2018

Mark E. Lutes, Chair of the firm’s Board of Directors and Member of the Firm in the Health Care & Life Sciences practice, in the firm’s Washington, DC, office, was featured in an MCOL ThoughtLeaders newsletter, discussing the following question: “Has employer demand for increased member cost sharing finally peaked, and what will happen in this arena over the next few years?”

Following is an excerpt

Kaiser Family Foundation (“KFF”) recently reported that, during the 10 year period 2006-2016, average payments for deducible and coinsurance among people with large employer coverage rose considerably faster than the total cost for covered benefits. Indeed, average deductibles increased from $303 to over $1,200. KFF also found that deductible now account for almost half of total cost-sharing (deductibles, copayments and coinsurance) up from less than 30% ten years before.

Is the high (HDHP) or higher deductible tool having a beneficial impact and will employers continue to adjust deductibles to accomplish health plan goals? An October 2017 meta analysis of twenty-eight studies published in Health Affairs finds the track record of high deductible health plans to be mixed. Eight of twelve studies reported a significant reduction in use of preventive services among HDHP beneficiaries. Both of the studies that looked at diagnostic testing reported lower utilization among HDHP beneficiaries. Thirteen studies reported significant reduction in medication adherence.

We also hear anecdotally that large employers believe that the HDHP lever has little play left in it. Many apparently would welcome alternative or at least supplemental tools. My belief is that, given these conditions, large employer plans will incent their beneficiaries by removing deductible barriers to those beneficiaries accessing care from provider groups and networks that provide a range of procedural and chronic bundles below a plan established reference price.

Employer plans have a material opportunity for savings through direct contracts with providers. Opportunities exist around key procedural (orthopedic, GI, cardiology and maternity) episodes. They also exist around key chronic conditions (COPD, diabetes CHF to name a few) that drive cost and for which outcome improvements would be welcome.

Today, the leading vendors/conveners for the Medicare BPCI program are ready to turn their attention to producing savings and higher outcomes for the self-funded market. They will soon bring their contracting and episode administration prowess to bear in this part of the commercial market. The market will materialize as they learn to solve certain plan design challenges and power their solutions with advanced beneficiary education and engagement tools.