Consumer Strategies for Employers

Employers are the customer of every other health economy stakeholder, and their employees are the end users, i.e., the consumers, of the products and services those other stakeholders deliver. Each health economy stakeholder whose business depends on providing a service or device or therapeutic has a vested financial interest in “capturing” 100% of the “share of care” for the services offered by that stakeholder, without respect to the financial impact to the customer or the clinical benefit to the consumer.

As a result, the incentive of every health economy stakeholder is to “divide and conquer” by encouraging or enabling employees to utilize healthcare products and services without regard to cost – and even clinical need. The promise of health savings accounts and high-deductible plans has not created the anticipated alignment of employer/employee interests in constraining healthcare costs, except for the unanticipated and increasingly common scenario in which employees defer care because of high deductibles.

In addition to having been misled by health plans, health insurance brokers and benefits consultants about the ameliorative effect of narrow networks, wellness programs and value-based contracting, employers have lacked visibility into actionable data about healthcare cost and quality. Health plan price transparency through CMS’s Transparency in Coverage initiative reveals how shabbily other health economy stakeholders have treated employers, who routinely pay rates that vary by 300- 400% for the same service with the same – or worse – quality. Based on this data, it is illogical and imprudent for employers to assume that they can trust anyone to assist their employees in making healthcare decisions that deliver value for money. It is axiomatic that no one cares about your money more than you do, and employers – whose commercially insured employees are the lifeblood of the U.S. healthcare system – should start acting like they care.

At the same time, employers bear significant responsibility for the current situation. More often than not, employer CFOs have delegated responsibility for managing the cost of employee health benefits to the human resources department. More often than not, the human resources department is the most ossified department in the organization, measuring success not by return on investment but by the number of employees griping about changes to benefit plans. That passive approach to managing one of the largest expense items in every company’s income statement should have ended long ago. Health plan price transparency will be the catalyst for a long overdue change in approach.

Corporate officers have fiduciary duties to the corporation and its stockholders. In Delaware, the state in which more than 1M businesses are incorporated, directors and officers of corporations owe a fiduciary duty of care to the corporation and its stockholders, which requires them “to make informed business decisions” based on “the information that is material to the decision” and “to review the information critically.” ^1,2,3 Because health benefits costs are a material expense for every corporation that provides them, the advent of health plan price transparency implicates the fiduciary duty of care for directors and officers – especially chief financial officers – to “make informed business decisions” about health benefit costs using health plan price transparency data.

Broadly speaking, employers have two options that will meet their fiduciary duty to manage the costs of health benefits: managing (1) the provider network, and (2) the benefit design. Savvy readers will note that the health plans, benefits consultants and brokers were supposed to have been managing those tasks for the last 50 years.

Implementing the necessary change will require courage, which is sorely lacking throughout the health economy. Whether the threat of personal legal liability – which is a potential outcome for corporate officers who fail to execute their fiduciary duties – is sufficiently motivating to produce requisite courage remains to be seen.⁴

Practically speaking, the most important consumer-focused strategy for employers is to create meaningful incentives to influence their employees to choose providers who deliver more value for money. Some consumers respond better to the carrot, and others to the stick. Every employer should understand which approach is more likely to influence the decisions of their employees based on their psychology. Employers should also use psychographics to understand which employees are more likely to be price-sensitive and, therefore, more likely to postpone or avoid necessary care.