Health care benefit solutions that guarantee tangible and fast ROI

In the current U.S. macroeconomic environment, there’s no getting around the complex issues we’re facing. Employers are scrambling amidst recession fears to find savings across every department and on every line item.

Aside from compensation, health care benefits are an employer’s largest expense and show no signs of slowing down.

In 2021, the average per-employee cost of employer-sponsored health insurance increased 6.3%, up from 3.4% in 2020, and it’s something experts say will continue to increase this year.

Employers are leaning heavily on their already under-resourced human resources teams, and tasking them with the impossible: significantly reduce costs while at the same time improve quality and the member experience.

As a result, HR benefits teams are developing a more focused strategy to address high cost claims. In our discussions with employers, consultants, and partners, one thing is clear: tangible and fast ROI is more important than ever.

Health care inflation set to outpace traditional inflation

The root cause of the dysfunctional health care system in the U.S. is the astronomical pricing of health care services.

It’s what health care economist Uwe E. Reinhardt talks about in, “It’s The Prices, Stupid,” which argues that utilization in the U.S. isn’t so different than other OECD countries, but the major difference are the higher prices for the same services and treatments.

The traditional fee-for-service model in the U.S. is a driver of high prices because it not only creates an expensive administrative bloat to process the immense complexity of claims, but it’s also extremely opaque, making it impossible to shop or compare prices.

According to a survey from the Business Group on Health (BGH), musculoskeletal, cancer, cardiac care, diabetes and maternity, are among the top conditions driving employer health care costs and 94% of large employers anticipate an increase in overall medical services this year.

Historically, we’ve seen that in times like these, health care inflation can outpace traditional inflation and the consumer price index.

So many point solutions, but cost savings and ROI not so clear-cut

When it comes to health and benefits solutions, there’s no shortage of options.

In the last decade, digital health offerings have grown exponentially and HR teams have hundreds of different vendors vying for their attention every day as they struggle with competing priorities.

A survey by Twill found that 27% of employers say the largest barrier to executing a successful digital health strategy are too many point solutions.

Plus, since many point solutions struggle to prove hard-dollar savings, or require several years to demonstrate ROI, layering on one solution after another isn’t effective and might be adding costs instead of controlling them.

Without a single source of accountability for a member’s care or business models that directly address the root cause of high prices, it’s difficult to achieve true cost transformation, and a tangible and fast ROI.

Centers of excellence, value-based care solutions provide proven and fast ROI 

Given these circumstances, employers must prioritize value-based care strategies that first negotiate down the prices and offer an alternative payment structure.

Programs that use contracted bundled payment agreements with pre-negotiated rates are proven to drive down costs, align incentives around appropriateness and quality of care, and provide price transparency and predictability.

Surgical and cancer care Centers of Excellence (COE) are an example of this model and can significantly dent the top conditions driving employer medical spend cited by BGH.

A 2021 study published by RAND Corporation in Health Affairs found applying bundled payments to surgical procedures resulted in 30% of unnecessary surgeries being avoided, and for those surgeries that were necessary, there was an 80% reduction in readmissions and 45% savings per procedure.

With planned surgeries, the largest area of medical spend for employers as a result of extremely high unit cost, bundled payments offer a significant, tangible and quick ROI, even after just one surgery.

Although carrier-based COE solutions may seem like an easy way to check the box, these programs typically apply a handful of quality metrics and narrow their PPO network.

Read more: Study pegs ROI for employer-sponsored health insurance at 47%

But at the end of the day, they’re still a fee-for-service model that hasn’t solved for root cause pricing issues.

Value-based care solutions are the only way to combat high costs and meaningfully transform the way we pay for and deliver health care.

A roadmap to curb high spend 

Health care costs will only continue to increase this year, making the need to invest in innovative solutions imperative. As employers start to identify potential partners, they should:

1. Analyze: when comparing solutions, determine the cost savings, ROI, and speed to ROI a partner can guarantee.
2. Prioritize quality: look for solutions that provide high-quality, evidence-based, multidisciplinary care, and can demonstrate improved outcomes and optimal patient experience scores.
3. Validate value-based care: confirm the solution offers a bundled payment model with full price transparency, cost predictability, and a post-surgery warranty to cover readmissions and complications.
4. Technology: look for solutions that are committed to delivering the best patient experience using a technology-first approach and offer a dedicated care advocate to help employees navigate the surgical process.

Employers must take action this year to control their costs and with value-based benefits that prioritize access to quality care, they can start to realize meaningful and tangible savings starting from day one.

Brent Nicholson, Co-Founder & Chief Partner Officer, Carrum Health