Smarter Health Care Deductibles Are a Win-Win for Employers and Employees - SPONSOR CONTENT FROM ELI LILLY - Harvard Business Review

By Eli Lilly and Company

Covid-19 continues to pressure many U.S. employers. Layoffs have caused an estimated 27 million Americans to lose employer-sponsored health insurance. And with 80% of CFOs expecting revenue and profit declines, they likely will look to trim benefits, including health benefits. Employer premiums for family health coverage topped $14,500 last year, up nearly 50% in the past decade. Many employers may be tempted to double down on past strategies—raising employee cost-sharing through higher deductibles, coinsurance and related mechanisms. But such tools, on their own, have a mixed cost-savings record. Instead, employers looking to control benefit costs can turn the challenge of Covid-19 into an opportunity to create smarter deductibles. By rewarding employees for using high-value care and helping them avoid low-value care, employers can save money without burdening employees. The combination of strategies below is one way to do this.

Consider Chronic Conditions When Raising Deductibles

High-deductible health plans (HDHPs) can save employers about $900 per worker per year compared with PPO plans. HDHPs cost less, in part, because they discourage unnecessary care. The trouble is, they can also discourage care employees and their dependents do need—especially people with chronic conditions. After one employer switched entirely to an HDHP, workers with diabetes saw out-of-pocket costs soar 49%, leading them to reduce and delay physician visits—even for high-priority care and acute complications—yet go to the emergency department (ED) more.

Employer benefits that burden people with chronic conditions are counterproductive. Chronic conditions drive roughly 90% of all health care spending, yet more than 30% of people with a chronic condition in their family struggle to pay medical bills before hitting their deductible. And that’s for the people who have insurance. In the Covid-19 pandemic, Congress and health insurers recognized that eliminating patients’ financial responsibility for essential care—like a Covid-19 test—was critical to protect patients’ health and avoid expensive hospitalizations. But when it comes to essential health services for chronic conditions, the situation remains far different.

Adopt Value-Based Insurance Design

Value-based insurance design (VBID) reduces or removes patient cost-sharing for essential and high-value health care services. VBID consistently improves medication adherence—by an average of 3 percentage points. And with no member cost-sharing, adherence jumps by 4.5 percentage points. Whether VBID reduces overall medical spending is less clear. But a systematic review found “substantial evidence” that better medication adherence reduces costs due to fewer hospitalizations, ED trips and outpatient visits.

Eli Lilly and Company’s health plan has combined an HDHP for all employees with VBID concepts. The company makes a meaningful upfront contribution, in January, to our employees’ health savings or health reimbursement accounts. The health plan also offers pre-deductible coverage for preventive medicines, holding patient cost-sharing to 10-20%—and zero for insulin. We want covered employees to get needed care whether their deductible has been met or not. Also, through our pharmacy benefit manager, Lilly passes rebates directly to consumers at the point of sale, saving participating members about $350 per year on average. These benefits have not been free, but our health care costs in recent years have risen at less than half the overall rate for employers.

Reduce Low-Value Care

If employers are looking for immediate cost offsets, they can extend VBID a step further to low-value care. The National Academy of Medicine and other have identified dozens of low-value services that, in particular clinical scenarios, should not be covered because they generate no value. Examples include widespread vitamin D screening, imaging for acute low-back pain without other warning signs and using brand-name medicines when identical generics are available.

During the Covid-19 pandemic, payments for low-value care suddenly dropped to nearly zero—as patients avoided health care facilities. This unexpected circumstance creates an important cost-saving opportunity. According to the University of Michigan’s Center for Value-Based Insurance Design, employers can alter their benefits to discourage or prevent low-value care spending, without harming employees’ health. The savings could be substantial. Low-value care, across all payers, averages about $120 per member per year. Such savings could offset employer spending to reduce patient cost-sharing as part of VBID.

Conclusion

Employers that use these and other strategies to create smarter deductibles can control costs now and, by making sure those with chronic conditions get the care they need, set themselves up for savings down the road. We believe it’s time for employers—which collectively cover half of all Americans—to work together to spread practices that improve care for people with chronic conditions. Large employers in particular can change standards in the benefits market to make healthy employees the rule—bringing dramatically better care to millions of Americans. It is not just our opportunity—it is our responsibility.

Learn more about Lilly’s approach to employee benefits by clicking here.

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Smarter Health Care Deductibles Are a Win-Win for Employers and Employees - SPONSOR CONTENT FROM ELI LILLY - Harvard Business Review
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