Contrary to Medicare and Medicaid managed care, there is very little risk taken by insurers in the commercial sector. HMO coverage is less than 15% nationally, and, when excluding California and Massachusetts, drops to 8%. The vast majority of employers, therefore, are directly bearing the risk of health care costs, with insurers acting as pass-through, third-party administrators paid to manage transactions. Those carriers, whether the so-called BUCAHs (for Anthem Blue Cross Blue Shield, United Healthcare, Cigna, Aetna, and Humana), or any of the regional ones, are usually more interested in placating their networks than pushing them to deliver better value.
Because they are bearing the financial risk of health care benefits, employers should be demanding far greater adoption of alternative payment models. Some are taking matters into their own hands, writing risk contracts directly with providers, but they are still a minority. Others are starting to demand that any carrier acting as their health benefits administrator delivers higher volumes of dollars in at-risk provider contracts, while being mindful to minimize reforms that could lead to employee disruption in a tight labor market.
François de Brantes
But so far, employers have been given few near-term options for APMs: total cost of care with accountable care organizations or a handful of procedural episodes in bundled payments. The first presumes some tightening of network options for employees, the second is uninspiringly limited in scope. Neither offers a roadmap to long-term success. In the ivory towers, the prevailing view is that all care will end up in integrated health systems accepting population health risk. Yet the acceptance of HMOs in the United States has been and remains widely unpopular.
But there is a novel APM model that, as a bonus, embeds pricing and quality of care transparency and, once employers and employees become familiar with it, should be widely embraced. Think of it as a large set of event-driven care packages that get triggered by consumer-patients. Each care package can be priced and adjusted for the individual’s medical history and other characteristics. Providers who want to bid for the care package can, and the price they’re offering, the warranty they’re willing to give, the quality of care they’ve been able to demonstrate are all available and comparable to that of other providers. For many consumers, this experience would feel familiar because it’s how they experience the most complex purchasing decisions of their lives, including buying their homes.
Some employers already use a version of this model but focus only on a few “centers of excellence.” What’s stopping them from expanding it? After all, wouldn’t someone who has been diagnosed with early-stage breast cancer want to know which providers want to care for her and what their quality record has been? Isn’t the same true for someone seeking lasting recovery from addiction or ongoing support for one or more chronic conditions?
Attempts at bringing this model to market have been made but failed because of inherent flaws in their design or the inability for most employers to implement it simply.
There is, however, a fully scalable and simple way to move it into the market and adopt it through the so-called excepted benefits plan. These plans are the centers of excellence exceptions that currently exist in almost all deductible-based health plans but can be applied to any number of conditions, procedures, and illnesses. An employer can select the subset of health events it wants to put into excepted benefits based on its employees’ demographic and other characteristics. In doing so, it can give employees a special benefit—care exempt from punishing cost-sharing—while gaining predictability in price and quality.
It’s doubtful that traditional carriers will rush to offer this model, but then again, they didn’t rush to offer consumer-directed health plans, either. That’s OK, because smaller, more nimble companies are getting into this business and, at some point, so will the lumbering BUCAHs. For employers balancing employee retention and control of ever-rising health care benefit costs, put the glasses on because alternative payment model myopia is curable and APM adoption no longer has to just chug along.