COVID-19 has your employer clients looking for alternative health plan options

When the COVID-19 pandemic hit, medical costs suddenly went flat. People began putting off elective surgeries as a safety precaution, and medical providers, needing to increase hospital capacity, stopped performing these procedures as well.

According to a study from Harvard T.H. Chan School of Public Health, the Robert Wood Johnson Foundation, and National Public Radio, 1 in 5 Americans delayed health care during the pandemic. As a result, big PPO carriers found themselves with a considerable amount of money left over, allowing them to keep 2021 renewal rates lower than years past. But that relief likely won’t be permanent.

Total health care costs are projected to climb to an average of roughly $15,500 per employee in 2021. That equates to $10,850 for employers, who pay roughly 70% of the costs, and $4,650 for employees.

These figures are slightly higher than the 5% increases large employers had projected in each of the last five years, and many employers remain on edge, unsure about the true effect of the pandemic on overall costs.

While organizations were hesitant in 2020 to make any significant changes to their health plans, this uncertainty has them finally ready to take a serious look.

Support for health care reform is growing

According to data from the National Alliance of Healthcare Purchaser Coalitions, there is growing support among employers for health care reform. Eighty-seven percent feel drug price regulation is helpful, while 79% believe there should be more regulation when it comes to surprise billing. Seventy-five percent support both hospital price transparency and hospital rate regulation.

But they’re also not waiting for government regulation to drive change; they’re being proactive. Employers are thoroughly assessing health care, looking for ways to deliver similar or better benefits to their employees while also controlling costs.

This has sparked a renewed conversation around alternative health care models, including reference-based pricing (RBP).

The benefits of reference-based pricing

A self-insured model for managing health costs, RBP works outside of traditional insurance plans by setting limits on the amount the plan will pay for certain health care services. These limits are based on the actual cost of service or a percentage on top of what Medicare would pay the provider for a service.

This results in a fair and reasonable amount for employers, members and providers – and has the potential to save employers anywhere from 20% to 30% of their total health care costs.

As concerns persist about rising health care costs for both employers and their employees, these savings couldn’t come at a more opportune time.

Offering employees the choice of health plans

Switching health plans – or, for that matter, any change that requires a new way of doing things – can be scary for employers. This results in many sticking with their current health plans, no matter how high costs climbed.

But times are changing, and there’s a growing trend in the world of health care.

Interest in self-funded health plans – and RBP specifically – is growing. The cost savings and other benefits RBP promises employers and their employees are outweighing any perceived disruption a change in health plan would cause.

Related: Reference-based pricing in a COVID-19 world

One reason for this is the realization that employers don’t have to completely forego the PPO they’re accustomed to. Increasingly, employers and brokers are embracing dual-option plans that let employees choose between a traditional plan offering and an RBP offering. This option provides flexibility, giving employers a safe way to explore employee reception to an alternative health plan, and to gather real data on utilization and costs that could help inform future decisions about coverage.

It’s also reinforcing that employees are open and ready for change. When Signature HealthCARE gave their employees the option to choose RBP or a traditional PPO plan, more than 70% chose the more affordable RBP model.

Addressing health care fears in 2021

Two-thirds of Americans are afraid they won’t be able to afford health care this year, per an AccessOne report. Meanwhile, roughly 50% are worried they can’t pay for an unexpected medical bill that’s less than $1,000.

Businesses, too, are growing more sensitive to costs given recent fluctuations. Employers finally appear ready to have serious conversations about alternative health care plans. They’re hungry to try something new.

For brokers, being educated on emerging trends like a dual-option health plan and being ready, able, and equipped to have open and honest conversations about all available models has never been as important.

Self-funded employers should already have the data they need to make an educated decision about their future health care plan, including how many participants they have, their current health care premium, and their average annual health care spend. Brokers can use that information to work with employers to develop a strategy that explains to employees why their company is looking at alternative health care methods. Help outline what benefits these new plans offer and identify where employees may find additional savings.

The past year has been a trying time for employers as they’ve have worked tirelessly to keep the lights on and keep their employees employed. In 2020, many employers had to get creative about how they did business to merely survive. With health care costs stable going into the current year, there wasn’t an urgency to explore new options.

But with projected cost increases on the horizon, employers are ready to apply that creativity to health care, finding ways to become more competitive and cost-effective and to reinvest in their business as they emerge from the pandemic.

Tom Wittick is the SVP, Growth of ELAP Services (www.elapservices.com), a leading healthcare solution for self-funded employers across the U.S. Founded in 2007, ELAP leverages almost 15 years of data to power its negotiation models and help organizations reduce their healthcare spend up to 30%.