Open enrollment: A six-step survival guide

Back-to-school time means open enrollment time is just around-the-corner for employee benefit plans nationwide. For employer groups, this is the time of year for behind-the-scenes discussions about options and plan designs, which often leads to some “arm wrestling” between benefits managers and chief financial officers.

Savvy companies depend on knowledgeable brokers to provide local, personal service and deep industry expertise to help them though the process.

Here are six ways brokers and employer groups can collaborate for a successful process:

  1. Do a cost/benefit analysis. It’s not too early for employers to get a handle on how their benefits worked out last year. What was a good investment? Did the wellness program lead to productivity improvements? What were the “pain points” for employees and for the benefits department? For self-funded plans, did expenses align with expectations or did surprises arise?
  2. Look for innovation opportunities. To attract and retain employees, try some out-of-the-box thinking. Is this the year to add holistic care to the product mix? Or distribute fitness trackers to encourage wellness program participation? Consider adding telehealth options or retail health centers for added convenience at an affordable price.
  3. Be timely. Too many organizations paint themselves into a corner with indecisiveness, uncertainty and endless meetings … then hope for miracles from their carriers so there’s no gap in coverage. Brokers and employers do best when they develop a firm timeline and stick with it.
  4. Communicate, communicate, communicate. Four in 10 employees don’t understand their benefits. Open enrollment is the perfect time to develop educational campaigns that help employees engage in their health care, understand high deductible health plans, budget for health savings accounts, explore their networks and get a grip on pharmaceutical formularies. Consider decision-support tools like a plan comparison chart, a medical cost calculator, or an FSA calculator.
  5. Go digital. Two-thirds of Americans have smart phones, and many have eliminated broadband connections at home, relying on their phones instead. So it makes sense that a growing number of companies allow beneficiaries to enroll using mobile devices. Others have added a digital concierge service that uses speech recognition and cognitive computing to answer employees’ questions about health coverage and other issues.
  6. Plan for post-enrollment. There’s more to health coverage than an ID card, and employees should know it. It’s essential to help employees understand their wellness requirement deadlines, know where to find plan materials, and learn to comparison shop for health care services

American workers say health insurance is the most important benefit they receive from their employers. That’s why savvy benefit managers make sure their companies offer competitive choices that help their companies retain current employees and recruit new talent.

Want to keep employees? Highlight your benefits and embrace 5 trends

With four out of 10 employees actively looking for a new job, there’s a renewed emphasis on retention. One way to remain the employer of choice is to highlight your company’s total value proposition for employees — including your significant investment in employer-sponsored health benefits.

Savvy employers have been using total compensation statements for about 20 years, and the newest approaches go beyond paper statements to web-based tools that provide on-demand information about your total investment in each employee.

Seeing is believing

There’s a strong link between how well employees understand their total rewards programs and their likelihood to believe it’s good, according to Aon Hewitt.

An added plus: Employees who believe their needs are being met are six times more likely to be engaged than others.

What to include? According to the Society for Human Resource Management (SHRM), total compensation statements typically highlight:

  • This includes the annual salary or hourly rate of pay plus commissions, bonuses, etc.
  • Health care. Employers generally pay 75 percent to 80 percent of employees’ health care benefit, or roughly $4,000 per employee, according to the Kaiser Family Foundation.
  • Wellness plans. This may include rewards for staying healthy, gym memberships, fitness discounts and more.
  • Spending accounts. This includes including flex spending plans, health savings accounts, health reimbursement accounts and dependent care accounts.
  • Paid leave, vacation time and sick time top the list. Also be sure to include holidays, personal days, parental leave, bereavement, military pay, jury duty, etc.
  • Life insurance and disability insurance are rarely top-of-mind but provide important safety nets for employees.
  • Employee assistance programs help your staff with personal problems and/or work-related issues.
  • Retirement contributions. Highlight your 401(k) or 403(b) plan and use this opportunity to encourage participation, especially if your company offers a contribution match. A fortunate few employees are also eligible for pension plans or other defined retirement benefits.
  • Educational support. This may be an educational reimbursement program or opportunities to attend seminars or participate in onsite training.

Companies that cannot afford to implement customized statements would be wise to get creative: Highlight the financial value of employee benefits during operational meetings or create quizzes and contests that encourage employees to understand your investments in their benefits.

Trends to tip the scale

How times have changed. While your parents may have worked 40 years for one company, typical Millennials will have 15-20 jobs throughout their careers. This creates a costly nightmare for employers in terms of recruitment, productivity and corporate culture.

Providing up-to-date benefits can tip the balance in your favor. Consider these trends:

  1. Expanded wellness programs. Think beyond flu shots and health screenings. Some of the newest trends in wellness include free (or cheap) fitness tracking devices, themed dress-up days, game leagues, and innovative workplaces (like collaborative work spaces and standing/treadmill desks), according to the International Foundation of Employee Benefit Plans.
  2. Total well-being programs. This new take on wellness helps employees manage stress, improve resiliency and conquer financial challenges. The 2015 World at Work survey found that nearly 75 percent of employers will increase expenditures on well-being programs over the next two years.
  3. Holistic care. Americans are spending nearly $34 billion out-of-pocket on complementary care. Consider extending employees’ coverage to acupuncture and massage – favorites of younger, non-traditional employees.
  4. Consumerism. Today’s employees aren’t passive consumers of health services. They expect anytime/anywhere access to care (via telehealth and retail-center health care), transparency tools with price and quality information, and rewards for health lifestyles.
  5. New perks. Many millennial business owners are offering flex time, free food, telecommuting, laundry services, onsite daycare and nap rooms, according to The Principal FinancialSM Well-being Index

Retail-based health clinics are here to stay. The walk-in centers got off to a quiet start about 15 years ago, and now the convenient-care industry is growing rapidly. The estimated $1 billion industry has more than 2000 retail health clinics nationwide — a number that’s expected to more than double in the future.

This trend is being driven by a shortage of primary care providers, demand for easier access to care and the new consumerism that’s entered the health care market. Cost and speed are also factors. Typically a visit to a retail health center is a fraction of the price of an emergency department visit and takes 15-20 minutes.

Formerly a cash-only option, retail clinics now have a strong foothold in the payer community: Forbes reports that four in five visits to CVS and Walgreen clinics are covered by insurance.

Clearly, benefit design plays a key role in driving patients to this high quality, lower-cost alternative.

Here’s what you should know about retail-based health clinics:

  1. They appeal to the budget-minded. For beneficiaries with a high deductible plan, the choice is a no-brainer. Several years ago, researchers compared the average cost of treating ear infections, sore throats and urinary tract infections in retail centers and traditional settings. Retail centers were the clear winner at $110, compared with $166 for physician’s offices and $570 for hospital emergency departments, according to Managed Care Magazine.
  2. They could save billions. Both retail clinics and urgent care centers are less expensive than a hospital’s emergency department for non-emergent care. Deloitte reports that an estimated 13.7%-27.1% of all emergency department visits could be handled elsewhere, saving the health care system about $4.4 billion annually.
  3. They could inch up spending. Clinics receive more than 6 million patient visits annually, and about 6 out of 10 visits were for medical care that patients otherwise would not have sought. This increased utilization is driving up costs, according to a recent RAND Corporation study. The bottom line: The use of retail clinics for minor issues was linked to an increase of about $14 per person per year.
  4. They provide cost-effective, quality care. Research shows that patients are receiving quality health care, often delivered by a nurse practitioner. This judicious use of nursing care leads to lower costs, especially in states where nurse practitioners are allowed to practice independently and prescribe medications, according to a Robert Wood Johnson Foundation report.
  5. Many business models succeed. Retailers including CVS, Walgreens, RiteAid, Target, Kroger and Walmart are all familiar players in the retail clinic game, often operating independent of other health providers. Other models are also thriving. For example, the Geisinger Health System uses an integrated model — it owns and operates more than 200 walk-in clinics that are part of its overall continuum of care. The Cleveland Clinic has collaborated with CVS Health to provide a hybrid system of more than 20 clinics in northeastern Ohio, according to Managed Care Magazine.
  6. The controversy continues. The medical community has raised red flags for a variety of reasons include a perceived lack of care coordination. For example, the American Academy of Pediatrics advises parents against using retail-based clinics “because they fragment children’s health care and do not support the medical home.”
  7. They could help control chronic conditions. Almost half of Americans have chronic conditions, like diabetes, asthma, hypertension and others. Retail health clinics may grow their business by helping their customers manage their conditions with convenient, affordable care. For example, patients may find it more convenient to go to a retail center for a blood pressure check and HbA1c monitoring instead scheduling checkups with their primary care physician.

Earlier this year, Medicare began covering advance care planning as a separate and billable service. In other words, physicians and other health care professionals can be reimbursed for consulting with Medicare patients about their end-of-life preferences.

Today’s employer benefit plans often cover advance care planning as well, although end-of-life care is rarely discussed with active employees.

This is an emotionally charged subject that not only impacts an individuals’ final months but also has significant financial implications for the health care system.

Here’s a look at the facts about end-of-life health care spending.

FACT: Americans aren’t getting the care they prefer.

Nine out of 10 adults say they would prefer to die at home if they had a terminal illness. Despite this preference, only about one-third of Medicare beneficiaries died at home.

Often, people nearing the end of their lives aren’t able to make decisions or communicate them, so it’s essential to have advance care planning discussions before they are needed, according to Dying in America, a report by the Institute of Medicine.

FACT: Roughly 25% of all Medicare expenditures are attributed to the 5% of beneficiaries that die each year.

Forget the old 80/20 rule. In health care, a disproportionate amount of money is spent in the last year of life. In fact, the largest portion of money is spent in the final month of life, according to a report from the Kaiser Family Foundation.

Arcadia Healthcare Solutions recently published an analysis of the cost of care during the final month of life, confirming the obvious: It’s up to seven times much more expensive to die in a hospital than at home. Additionally, patients in hospitals have many more (often unpleasant) medical interventions in the last days of their lives than those who die in other settings.

FACT: Other countries are also struggling.

The United States has a lower proportion of deaths in the hospital in the last six months of life than Canada, Belgium, England, Norway and Germany, according to research published by the Perelman School of Medicine at the University of Pennsylvania.

The cost? Spending on hospital care in the last six months of life in Canada averages $21,840 compared with an average of $18,500 in the United States. Belgium, England and the Netherlands spend $15,699, $9342 and $10, 936 respectively.

FACT: American medical schools place little emphasis on end-of-life care.

Today, our medical schools teach students to treat disease, and our health care system is primarily based on a fee-for-services model that rewards professionals based more on quantity of care than quality of care.

Although there have been recent improvements, initiating conversations about advance care planning is still a conundrum: Patients, family members and clinicians each wait for others to bring up the topic.

FACT: Advanced Directives are getting a shot-in-the-arm

A whopping 40% of Americans ages 65 and older do not have advanced directives or haven’t written down their preferences, according to the Kaiser Family Foundation. Demographics play a role: Advance directives used are less by African Americans and Hispanics, and people with lower levels of income or education have lower rates of advance directives than others.

What about DNR (Do Not Resuscitate) orders? They’re not enough because they don’t address quality of life and treatment preferences.

Hopefully, Medicare’s decision to cover end-of-life talks will help overcome these obstacles.

It’s been more than six years since the Affordable Care Act (ACA) went into effect, so it’s time to ask the question: Is it working?

The answer depends on who you ask.

Polls conducted by Gallup and the Kaiser Family Foundation both show that public opinion is about evenly split – often down political lines with Democrats supporting the ACA and Republications against it.

The government isn’t shy about promoting successes.

In July, U.S. health chief Sylvia Burwell touted the ACA’s success in Cleveland by highlighting a program that helped people with diabetes control their disease cut costs by $2,600 per individual. The program, which was funded through the office of innovation at the Centers for Medicare and Medicaid Services, used lifestyle coaches to help participants change their eating habits and increase their activity levels.

The U.S. Department of Health & Human Services also touted several accomplishments at the 5-year mark including:

  • 4 million people added health coverage through a combination of the Health Insurance Marketplace, extended eligibility for young adults (to age 26), and Medicaid expansions.
  • 55 million women have preventive services coverage with no out-of-pocket costs.
  • Uncompensated care in hospitals was reduced by $7.4 billion.
  • In 2015, nearly 80% of shoppers using gov could buy coverage for $100 or less after tax credits.
  • There’s been a slow-down in health care inflation.
  • Patient safety has improved, saving an estimated 50,000 lives and $12 billion.
  • Accountable Care Organizations have saved Medicare a combined $417 million.

Researchers at Rice University in Texas confirmed that the ACA has helped more Texans acquire health insurance at every age, ethnic and income level across the state. Premium subsidies are key: Today 84% of the 1.3 million Texans enrolled in the ACA Marketplace health plans receive subsidies to help pay for premiums.

The flip side

Of course, not everyone agrees that “Obamacare” is working. Critics note several flaws and weaknesses:

  • More than two-thirds of employers favor repeal of the Affordable Care Act’s employer mandate, according to Mercer’s 2015 National Survey of Employer-Sponsored Health Plans. The main issue: The prohibitive cost and administrative burden of showing they are in compliance.
  • Out-of-pocket health care costs for people with employer-sponsored insurance went up, according to a report by the Kaiser Family Foundation.
  • People are falling into holes in coverage according to “Uncovered California,” a Huffington Post series exploring the problems faced by millions of Californians who are uninsured or underinsured.
  • High premium surcharges for smokers have backfired, according to a Yale School of Public Health report released in July. Many smokers are opting out of coverage instead of quitting tobacco, which was the intention of the plan.
  • Federal coverage mandates rankled employers. Among the most significant was Hobby Lobby’s objection to providing contraceptive insurance coverage. This case made it to the Supreme Court, with a 5-4 decision that rejected the contraceptive mandate for family-owned companies that have religious objections.

With the presidential election just around the corner, health care remains a key topic of debate. Undoubtedly more change is on the horizon.

As more and more baby boomers exit the workforce, fewer and fewer companies are offering medical benefit plans to their retirees. And organizations that do provide coverage are utilizing new strategies to manage the impact on their bottom line.

In the 1980s, more than 60% of employers with 1000 or more employees provided financial assistance to retirees to help with medical costs. Today that number has dropped to roughly 25%, and the trend is accelerating.

This movement is clearly bad news for employees approaching retirement age – especially younger retirees who must wait until age 65 to be eligible for Medicare. In fact, more than half of workers plan to work longer so they can continue to receive employer-sponsored coverage, according to the Employee Benefit Research Institute

A report from Towers Watson indicates several barriers to retiree coverage:

  • Accounting issues. Future liabilities are a major hurdle. In 2013, Fortune 1000 companies reported about $385 billion in SEC disclosures.
  • ERISA obligations. This includes reporting, disclosure and fiduciary responsibilities.
  • Administrative costs. The expense of administering and maintaining retiree benefits has little payback on the bottom line.
  • Excise tax (aka Cadillac tax). Health care reform legislation prescribed new tax obligations for employers offering rich benefit plans. Congress recently delayed implementation until 2020, however, making this a cloud on the horizon and giving employers more time to adjust.

Creative solutions

Employers that are committed to coverage have made changes to control corporate costs at the expense of retirees’ pocketbooks. Examples include:

  • Grandfathered benefits. Many large employers have pledged health benefit assistance to long-term employees, but new hires must fend for themselves when reaching retirement age.
  • Increased cost-sharing. Municipalities that formerly covered 100% of medical expenses are now requiring premiums from former employees, according to MarketWatch. In a more dramatic turn, the City of Detroit used the bankruptcy process to slash its retiree health insurance benefits from $4.3 billion to $450 million.
  • High deductible health plans (HDHP). Nearly one-quarter of workers are enrolled in an HDHP, which reflects a 4% increase over the past 10 years. In addition, almost half of workers have a general annual deductible of at least $1,000 for individual coverage, according to a Kaiser Family Foundation
  • Raised out-of-pocket expenses. Benefit designs are shifting to place more of the financial burden on retirees through increase co-pays, coinsurance and deductible levels.
  • Tightened eligibility. Employers are putting more parameters around eligibility. For example, individuals with access to coverage through other plans could be excluded from their spouse’s plan.
  • Cash contributions or health reimbursement arrangements (HRAs). Many employers providing cash or HRA contributions for both pre-Medicare and Medicare-eligible retirees, and then sending them to state and private exchanges to purchase their own coverage.
  • Improved retirement-readiness. Towers Watson reports that employers are using account-based health plans, education, wellness programs and decision-support tools to help current employees understand their coverage and learn to plan wisely for future medical costs.
  • Voluntary Employee Benefit Associations (VEBAs). In the wake of employer bankruptcies, special tax-exempt VEBA trusts have been set up to allow retirees in the auto, steel and airline industries to take advantage of the Health Coverage Tax Credit. This credit covers 72.5% of insurance premiums for those aged 55-64 who are in a qualifying health plan and receive pension benefits from the Pension Benefit Guaranty Corp., a federal agency that often takes over pension plans of bankrupt companies.

The bottom line? Medical costs are a major factor in most retirees’ budgets. The Wall Street Journal reports that a healthy man should set aside an extra $143,800 for healthcare costs in retirement. Ironically, less healthy individuals can earmark smaller amounts because their chronic conditions signify a shorter life expectancy.

Relief and uncertainty

The Affordable Care Act (ACA) has brought some relief to younger retirees who were hard-pressed to purchase individual health insurance coverage before health reform: Access has improved as carriers cannot refuse to cover individuals with pre-existing conditions, and affordability improved with premium assistance.

What’s next? The future of retiree medical coverage is certain to be impacted by the upcoming election. Presidential candidate Hillary Clinton has floated the idea of making Medicare available to people in their 50s, Donald Trump has pledged to repeal “Obamacare” while leaving Medicare untouched, and Health Affairs’ overview of the new House Republican’s health plan indicates a phased increase in the age of Medicare eligibility to match the Social Security retirement age.

Prescription drug prices jumped more than 10% last year, according to The Washington Post, marking the third year of double-digit inflation. The U. S. spends almost $3 trillion on health care annually, including nearly $3 billion on prescription drugs.

Here’s an overview of industry trends that could impact employer benefits in the near future:

Pharmaceutical trends

  • Specialty drugs. Medications for conditions like cancer, central nervous system disorders and inflammatory conditions can range from $600 per month to $100,000-plus per year. Among the most discussed: Sovaldi, a $1,000 per pill treatment for hepatitis C.Nearly 700 new specialty medications are under development, a factor that could triple spending by 2020, according to The Pew Charitable Trust.


  • Generic price increases. Between 2008 and 2015, the price of almost 400 generic drugs increased more than 1,000%, according to the Harvard Health Blog. Reasons include industry consolidation, production difficulties and reduced demand for certain medications.


  • Outrageous behavior. Last year, Turing Pharmaceuticals acquired rights to a very old treatment for a parasitic infection, and then raised the price 5,000%, from $13.50 to $750 a pill. The issue is raising eyebrows, and congressional probes are triggering reforms.


  • Merger mania. The landscape is changing with a wave of consolidations and mergers at the retail level. For example, CVS took over Target’s pharmacies, and Walgreens is moving forward with plans to acquire RiteAid, according to Forbes.

Health plan trends

  • Premium increases. The American Academy of Actuaries says the increase in pharmaceutical expenditures will continue to outpace the costs for other medical services in the year ahead. This is one of many issues driving up health plan premiums for 2017.


  • Cost management. Payers are using a variety of benefit designs to control utilization and mitigate costs. These include updated formularies, increased cost sharing, step therapy and prior authorization.


  • Value-based pricing. Deloitte reports that a paradigm shift from volume to value could force pharmaceutical companies to link payment for medications to real, measurable value.

Consumer trends

  • Widespread usage. Roughly 57% of health care consumers take prescription medications, and nearly half of them use three or more prescriptions daily.


  • Price variation. Consumer Reports’ secret shoppers learned that drugs could cost up to 10 times more at one retailer vs. another in the same town. Only 17% of consumers comparison shop today, but that could change as health care transparency garners more attention.


  • Skipped doses. About 1 in 10 people don’t take their medications, or don’t take them as prescribed, because they can’t afford them, according to the Centers for Disease Control. Age is a factor: Adults age 64 and younger are about twice as likely to skimp on medication compared with those 65 and older.

When the Affordable Care Act (ACA) was passed, many believed it focused too much on health insurance and not enough on the delivery of health care.

Change is in the air.

Here’s a look at major changes that are transforming way health care is delivered.

Payment reform

Historically, physicians and hospitals were paid on a fee-for-service basis: The more they saw patients, conducted tests and performed surgeries, the more they earned. This led to inefficient and extraneous care that drove up costs for individuals, for businesses and for the government.

Payment reforms are being implemented with the goal of making physicians and hospital systems more accountable for providing the right care at the right time for the right price.

The newest endeavor is the Medicare Access and CHIP Reauthorization Act (MACRA), with updated rules for quality and payments. Although MACRA is only for government plans, it’s part of a trend: Many initiatives are underway to develop payment systems based on performance metrics, patient experience and outcomes, according to the Robert Wood Johnson Foundation.

Employer innovation          

Employees at Lowes, JetBlue and Walmart can have free surgery at certain prestigious hospitals.

The program leverages a bundled payment system with a flat rate to a hospital for all related treatment including surgery, physical therapy and potential complications.

It’s a win-win move that’s saving money for the employers, creating happy employees, and allowing medical providers, like Johns Hopkins Hospital in Baltimore, to attract more patients.

Medicare is using a similar approach for hip and knee replacements in Miami, Los Angeles and more than 60 other metro areas, and it’s saving about $4,000 per procedure on orthopedic cases.

This is all part of an overarching attempt to eliminate the kinds of price and quality discrepancies highlighted in the Dartmouth Health Atlas Project, which documented glaring variations in medical care and costs in the United States.

Hospital transformation

More hospitals and health systems are starting or expanding health plans. Why? Combining medical claims and clinical data builds population health and allows hospitals to control more of the premium dollar.

Hospital systems are also growing their medical groups as more doctors find it impractical to have independent offices. By the end of 2016, perhaps only one in three doctors will remain independent. By comparison, 57% of doctors were independent in 2000.

In addition, payment reforms are driving cost-reduction activities. Providers are embracing Toyota’s lean manufacturing approach to improve quality and eliminate waste: Employee kaizen events focus on reducing medical errors, improving safety and streamlining processes.

Plus, there’s a renewed emphasis on ambulatory care and out-patient procedures as the number of traditional hospitals is shrinking. New “bedless hospitals” provide all of the services and care one would expect from a traditional hospital, but without costly overnight stays.

Patient engagement

The increased emphasis on patient engagement is epitomized by the growth of patient-centered medical homes. This team-based approach to primary care puts the patients’ interests and concerns at the center of their care, and it puts more emphasis on coordination of care for better outcomes and managed costs.

Sales of health and fitness apps are projected to reach $58 billion by 2020, and some of the newest apps help people with chronic illnesses manage and monitor their conditions. One major health system even gave tablet computers to patients so they could record their vitals and connect with their care teams.

Higher out-of-pocket expenses with high deductible health plans are creating a consumer mindset that’s prompting patients to shop for care. The Robert Wood Johnson Foundation reports that more than half of people have tried to research prices before getting care.

Price negotiation also comes into play: The Wall Street Journal created waves with Jeffrey Singer: The Man Who was Treated for $17,000 Less.

Concierge medicine

A growing number doctors and patients favor concierge medicine, in which patients pay an annual retainer directly to a doctor in return for preventive services, same-day appointments and house calls.

Advocates cite personalized care, shorter wait times, more expansive preventive care and quicker test results. Many patients also carry a health plan to cover serious health issues.

Skyrocketing prescriptions

Unfortunately, there’s no silver bullet to solve the out-of-control increases in drug spending, which jumped up more than 10% in 2015, according to The Washington Post. The issue is getting a lot of attention right now thanks to congressional probes on the topic.

Biosimilar drugs may help. These lower-cost copies of complex biotech drugs could save up to $110 billion in the U.S. and Europe by 2020, according to a recent Reuters report.

Also watch for pharmaceutical companies and others to discuss value-based pricing arrangements in a shift from volume to value.

Imagine visiting a gas station, but not knowing the price per gallon until your tank is filled. Or buying a TV, but not knowing the cost until your credit card statement arrives.

That’s the scenario most Americans face with health care services. And it’s one of many factors driving up health care spending, which is on track to reach 20% of the GDP by 2020.

Prices fluctuate wildly. An appendectomy can range from $1,529 to $186,990, and hip replacements can cost anywhere from $11,100 to $125,798, according to a report published by George Washington University.

The solution? Greater price transparency, which has the power to lower the cost of health care, says the Robert Wood Johnson Foundation. Others concur. More than 30 states have passed or proposed legislation to increase price transparency.

Skin in the game

Individuals’ interest in the cost of treatment depends largely on their personal out-of-pocket expenses. With fixed co-pays, beneficiaries have little “skin in the game.” But as high deductible health plans and larger coinsurance costs become more prevalent, price information becomes more important.

Public Agenda reports that people with higher deductibles are showing an interest: 67% of those with deductibles ranging from $500 – $3,000 have sought out price information, and 74% of people with a deductible greater than $3,000 tried to find pricing.

Silver and Bronze health plans, available on health insurance exchanges, are also driving interest as beneficiaries pay 30% to 40% of their health care costs out-of-pocket — a sizeable incentive to check prices.

This issue is garnering increased attention.

Time magazine explored the issue with its 2013 cover story, “Bitter Pill: Why Medical Bills Are Killing Us.” And The New York Times “Paying Till It Hurts” series is an ongoing exploration of the $2.7 trillion American health care system.

It’s complicated

In reality, shopping for health care isn’t like shopping for a TV. It’s difficult for consumers to get meaningful price information for a variety of reasons including:

  • Difficulty of predicting services in advance
  • Billing from multiple providers
  • Variety of benefit structures
  • Contractual non-disclosure agreements between providers and insurers
  • Anti-trust concerns
  • Fee-for-service payments that rewards providers based on the number of services provided instead of outcomes

Another hurdle is the lack of training for doctors, who are traditionally “cost blind” about the procedures they recommend or comparative prices between facilities.

Usable information

Many entrepreneurs and organizations have jumped on the transparency bandwagon including Healthcare BlueBook, Castlight Health, Costs of Care and others.

Even when people can find health care price databases, however, they’re generally given “reference prices” that don’t calculate the actual costs based on their benefits.

Some insurers are addressing the issue. For example, Aetna developed a Member Payment Estimator that covers more than 550 common services, taking into account users’ specific plan. Members can also tally total out-of-pocket costs for bundled prices including the procedure, the facility fee and professional fees.

United HealthCare and some regional Blue Cross Blue Shield plans are following suit, along with independent carriers like Michigan’s Priority Health.

Will it work?

Price transparency in health care is fraught with conflict.

Some experts believe providers may play games — lowering publicized prices while increasing other prices to offset their loss. Or lower-priced facilities may narrow the gap by raising prices.

Skeptics also fear the American consumer won’t make savvy use of price information, concluding that more expensive care equals better care. (In reality, there’s little or no evidence to suggest that high health care costs correlate to higher quality.)

Time will tell. Price transparency could bring us closer to value-based health care, with its potential to fix what’s broken in our current system. And transparency is sure to resonate with employer groups that are paying ever-higher premiums for employee benefits.

The facts about chronic disease are heart-stopping: At least 85 cents of every health care dollar is spent on chronic conditions, according to the Centers for Disease Control.

The high cost of chronic care has a direct impact on self-funded employers, who pay directly for the medical costs of their employees. It’s also a driving factor in year-after-year premium increases for employers who choose fully funded plans.

In fact, one study says employers lose more in productivity than they pay for insurance premiums. For example:

Chronic Condition Direct & Indirect Costs
Heart disease and stroke About one in every six U.S. healthcare dollars is spent on cardiovascular disease. By 2030, annual direct medical costs could reach $818 billion, lost productivity costs could exceed $275 billion.
Hypertension/high blood pressure One in three adult Americans have high blood pressure, costing $46 million in health care services, medications and missed days of work
Diabetes In 2012, the medical costs related to diabetes totaled $245 billion, including $176 billion in direct medical costs and $69 billion in reduced productivity.
Asthma One in 13 people have asthma, and their medical expenses total $56 billion nationally, or about $3,300 per patient each year.



Many of the diseases that ruin our health and decimate our pocketbooks are linked to lifestyle choices, including.

  • Health Affairs reports that obese adults spend 42 percent more on healthcare costs than those with a healthy weight.
  • Sedentary lifestyles. In “The Price We Pay for Sitting Too Much,” The Wall Street Journal reported that inactive behaviors, including sitting for extended periods of time, increases our risk for dozens of chronic conditions.
  • Bad habits. Cigarette smoking is linked to 480,000 deaths annually and heavy drinking is linked to a dozen diseases, according to Web MD.
  • The typical American eats only one to two fruits and vegetables each day. And nine out of ten adults have too much sodium every day, which is closely linked to blood pressure and heart disease.

Using targeted approaches

The Robert Wood Johnson Foundation reports that people with chronic conditions use 75 percent of hospital days, office visits, home health care and prescription drugs. So it’s no surprise that insurance carriers are laser-focused on reducing their impact.

Recently, RAND Health surveyed 70 health plans to assess chronic care management programs and their effectiveness. RAND noted that the workplace, family members and the community can improve results by becoming part of the solution.

Among other findings:

  • Insurer’s biggest challenges are engaging members and coordinating with providers.
  • Incentives have a good ROI. About half of plans offer incentives, ranging from gift cards to lower premiums, to encourage member participating in programs.
  • “Big data” and predictive modeling help insurers identify risk and prioritize interventions.
  • Technology is part of the solution: Insurers are using remote monitoring, telemedicine and smartphone apps to engage their members.
  • Patient-centric approaches are being embraced. This holistic approach addresses patient needs and fills gaps across multiple conditions.

Payers expect that effective programs will eventually result in more competitive products, which is good news for employers.