Leadership   //   August 9, 2022

Traditional company health plans are ‘unsustainable,’ experts warn

Most employers are not aware that how they manage their employee healthcare costs may lead to worse health outcomes, greater medical expenses, lower productivity and more absences, according to a new study. 

In a survey of 50 executives at U.S. companies employing a combined 250,000 people, the cancer support organization CancerCare found that a solid majority (62%) did not think so-called formulary tiers — where pharmaceuticals are divided into groups by cost — were a barrier to care, while about half said the same of pharmacy-preferred lists of drugs. Meanwhile, 6 in 10 business leaders polled did not see the insurer appeals process as an impediment. CancerCare argued that such measures — while designed to curb costs — may have the opposite effect, leading to employees delaying treatment and failing to take medications. 

“Keeping a lid on soaring healthcare costs should not be done by reducing access to needed care,” said Patricia Goldsmith, CEO of CancerCare, founded in 1944. “With a better understanding of the unintended consequences of utilization management, employers can design benefit plans that allow their employees access to prompt and effective treatments while controlling overall healthcare costs.”

Healthcare costs have long been a burden on companies, especially small businesses. As of 2020, half the U.S. population was coping with a chronic illness, while 86% of healthcare costs were related to such cases, the National Library of Medicine reported. Five chronic diseases or risk factors alone — high blood pressure, diabetes, smoking, physical inactivity and obesity — cost U.S. employers $36.4 billion every year due to missed work, according to stats from the Centers for Disease Control. 

Many companies continue to rely on traditional chronic-care models characterized by periodic in-person encounters that can be inconvenient, expensive and insufficiently frequent, said Stu Clark, CEO of the healthcare provider Premise Health. The smartest business leaders, he suggested, “understand the need to get ahead of these chronic diseases, which may not be expensive now but will be in the future. A healthier workforce can mean lower direct costs for employers, and lower indirect costs if workers miss fewer days of work because of illness.”

“A healthier workforce can mean lower direct costs for employers, and lower indirect costs if workers miss fewer days of work because of illness.”
Stu Clark, CEO of the healthcare provider Premise Health.

“Employers are seeing this impact in their populations, and they recognize that the only way to lower costs is to provide exceptional healthcare that prioritizes health outcomes,” Clark explained. “To do this, employers are taking steps to increase access to care, enhance healthcare experiences, and improve the quality of care employees receive. The long-term goal is to improve the health of your population, which leads to healthier people and lower costs over time.”

Donovan Pyle, CEO of Health Compass Consulting, related that after working on the carrier and brokerage side of the insurance business, he saw firsthand how misaligned incentives were to employers and created a new consulting and benefits management model to help employers. Pyle argues that the traditional health plans most employers subscribe to are unsustainable. The reason? The plans pay for care that employees never actually use, while the plans tend to overpay for the care people do get, driving up premiums. He pointed to a report from the Journal of the American Medical Association which revealed that 25% of everything spent on healthcare in the U.S. is pure waste. 

“Commercial insurers have little incentive to reduce rates and lots of reasons to increase rates,” Pyle argued, encouraging businesses to “work with vendors whose financial interests align with theirs. Only then will they have the clarity and control needed to maximize their healthcare investment.” 

Vincent Amodio, founder and CEO of Icon Medical Centers, which specializes in treating automotive and sports-related injuries, said employers should analyze the actual wants and needs of their people when it comes to healthcare. When employees are brought into the decision-making process, they’ll likely be more motivated to take a more active role in their own healthcare, he suggested. 

Likewise, more companies are taking the matter of the health of their people into their own hands.

Linda Shaffer, chief people and operations officer at Checkr, a SaaS startup and employer background check service, said she’s seen a rise in the number of absences and a decline in productivity due to employees coping with illnesses. In order to mitigate these issues, Checkr is working proactively to improve the health and wellness of its people by way of health screenings, education on chronic disease prevention and gym membership reimbursements. The company also offers health insurance that is low-pay and low-deductible, with various different plans from which to choose. 

“By taking these measures,” Shaffer said, “we hope to reduce the burden of healthcare costs on our company.”