Recent news from eHealth and the Purchaser Business Group on Health reinforce employer frustration with rising coverage costs as they foot the bill.
In the 1976 film Network, anchor Howard Beale—frustrated with society's ills—famously exclaims on air: "I'm as mad as hell, and I'm not going to take this anymore!"
While today's employers—frustrated with rising healthcare costs—might not word it that way publicly, they are clearly looking for options beyond traditional group coverage and even TPA-administered self-insurance.
"Some big employers are getting upset with the current system," says Ken Janda, a consultant, adjunct professor at the University of Houston College of Medicine, and 40-year insurance industry veteran.
Two announcements within the past two weeks reinforce that they are turning to new solutions.
eHealth and PBGH announcements signal growing trends
In late August, online private health exchange eHealth announced it would offer employers "ICHRA health insurance products and services." Through Individual Health Coverage Reimbursement Arrangements, introduced in 2020, employers make defined contributions to employees to purchase their own insurance and subsidize premium and other costs.
On September 12, the Purchaser Business Group on Health (PBGH) debuted new strategic goals to "redirect" member spend and purchasing toward affordable, whole-person, equitable care. PBGH, which includes nearly 40 large public and private employers, will also launch a Public Purchaser Advisory Committee to "elevate the needs of public members and help further integrate the work of public and private purchasers."
Indeed. The PBGH press release noted that its members are "frustrated by uneven quality and out-of-control spending" and that some 90% of large corporate executives "believe the cost of providing health benefits will become unsustainable" within five to 10 years. This from an April 2021 survey from PBGH, the Kaiser Family Foundation and West Health Institute. Some 85% "expect the government will be required to intervene to provide coverage and contain costs."
EVP for Health Policy, Larry Levitt, notes: "Any efforts to expand public coverage options or restrain prices will be met with strong opposition from the health care industry. Employers … could be a powerful counterweight."
Two sets of golden handcuffs
One could argue that health benefits have become "golden handcuffs" for employees and employers alike—binding people to unhappy jobs to maintain coverage and turning employers into healthcare's predominant payer as a way to attract and retain talent.
"In what remains a tight labor market, employers are absorbing most of the health care cost increases," said Debbie Ashford, North America chief actuary for health solutions at Aon. In August, the company projected a 6.5% rise in 2023 per-employee healthcare costs. Based on data from 700 employers, the increase is more than double than what employers paid from 2021 to 2022.
Defined contribution on the rise
Upticks like these need the counterweights that KFF's Levitt mentioned. ICHRA is one of them. The arrangement represents the kind of "defined contribution versus defined benefit" disruption that The Innovator's Prescription called for more than a decade ago.
And while the prediction that vehicles like Health Savings Accounts paired with high-deductible plans would account for 90% of the private health plan market by 2016 has not yet materialized, an eHealth spokesperson indicated ICHRA interest has been notable and emerged before the company had launched its dedicated website to promote it.
Willis Towers Watson (WTW) also reports a rise in defined contribution:
- 41% of employers currently use the strategy with another 11% "planning or considering doing so in the next two years."
- These contributions often differ by employee tier.
- More than 28% of companies band defined contributions based on employee wage or job class with 13% more likely to join by 2025.
This data comes from the WTW 2022 Best Practices in Health Care Survey, which included nearly 450 U.S. companies and their collective 8.2 million employees.
Employers ready to choose their adventure
It will take a while for defined contribution and strategies like direct contracting to predominate.
"Right now, employers will continue to look to self-insurance with insurance companies to support them. But some will demand lower prices, and be willing to look at different network configurations," says Janda, adding that defined contribution is likely to drive more rapid change.
If employers are indeed mad as hell like Network's Howard Beale, new coverage options will help them follow a new maxim: don't just get mad, get even.
Laura Beerman is a contributing writer for HealthLeaders.