About 157 millionAmericans get their health care coverage through their employers. And those costs have been going up — a lot. Hospitals, for example, charge those with private insurance 2 1/2 times what Medicare pays.
Those costs are a burden on many employers, and a number of big and small businesses have been trying a lot of things in the hopes of containing costs.
Tom Savidge is one of those businessmen. He went into business to provide mental health care and substance abuse recovery services to people who need help. But Savidge has spent a lot of his time figuring out how to pay for the health care of his 300 employees.
When we met Savidge earlier in this series, the Greenville, North Carolina-based businessman told us those costs have tripled since he opened his first Port Health clinic 17 years ago, so we went back to ask how he’s been dealing with those costs
First, he says, he tried to make his employees healthier. Those who took care of themselves would get a high ranking and pay less for their coverage. Those who didn’t paid more.
“You’d meet with a medical professional and they’d evaluate you on things like participation in preventative care, things like body fat, smoking,” Savidge said. “And if you met level 1, we would pay 100% of your health care plan.”
That worked for a while, Savidge says, but eventually, employees gave up. And as for cost?
“No,” he says. “It did not result in lower insurance rates.”
Next, Savidge says, were the lectures telling staff to avoid expensive emergency room care when a simple doctor’s visit would do. But that, too, had little effect.
So he changed insurance agents and insurance companies multiple times.
Last year, he cut out the middlemen. He set up his own on-site pharmacies, which charge less than retail chains. And he again fired his insurance company. Now he negotiates directly with doctors and hospitals for lower charges.
“Pretty much everyone is willing to negotiate,” Savidge said. “Being a physician or a medical provider, there’s a lot of administrative functions and costs that are tied into that, too. So if they can eliminate a step, they’re going to do it.”
Cutting out all the administrative red tape will save his company about $200,000 this year, Savidge estimates. That’s about one-tenth of what it currently spends on health care.
Savidge’s struggles aren’t all that unusual. Fifty-six percent of employers offer coverage, and they’ve been hit hard by rising health care prices, said Harvard University professor Dr. Jeff Levin-Scherz.
“If health care costs continue to grow at a rate faster than overall inflation, (if) they continue to grow at a rate faster than increased productivity, at a rate faster than the increase in the gross domestic product each year, at some point that crowds everything else out,” Levin-Scherz said.
Levin-Scherz also works for the consulting company Willis Towers Watson, and he advises companies about their choices.
“As health care costs go up,” Levin-Scherz said, “companies make choices to automate instead of hiring people because you don’t need to buy health insurance for their computers.”
“As health care costs go up, companies make choices to automate instead of hiring people because you don’t need to buy health insurance for their computers.”
Family premiums have risen 55%over the last 10 years, the Kaiser Family Foundation reports. In North Carolina, the average family premium was $20,000 in 2019, according to the Employee Benefits Research Institute. While employers continue to pay70% of the total, employees pick up the rest.
As prices have gone up, plans have gotten less generous. Workers now pay morein deductibles and copays. And more than two-thirds of North Carolina employers now offer high deductible plans, the Employee Benefits Research Institute reports. Nationally, half of the workers with those plans have skipped care because of the cost, Levin-Scherz said.
“They’re moving from a $1,000 deductible to a $4,000 deductible,” he said. “When you’re talking about people who are of modest income, many people will choose to not get care.”
The health care crisis has spawned many attempted solutions — some effective, some less so. Employers tried offering wellness programs, but those have had no effect on costs. Some employers offer coverage that steers people to lower-cost providers, and some even fly employees out of town for certain high-cost procedures.
“There are huge differences between the most expensive provider and the least expensive provider,” Levin-Scherz said. “Those huge differences usually have nothing whatsoever to do with quality.”
Like Savidge, some employers are now contracting directly with doctors, cutting out insurance companies. One large medical practice in Charlotte, Tryon Direct, now markets directly to companies, offering an estimated 15-25% savings on prices.
Another new trend is “value-based care,” in which employers pay providers based on how well their patients do.
Some of America’s largest companies have gotten into the act. Stock prices for several health care companies were rocked three years ago when the CEOs of three business powerhouses — Amazon, investment bank JP Morgan and conglomerate Berkshire Hathaway — announced they were combining forces to disrupt health care markets by providing good care at a reasonable cost.
Warren Buffett, known as the “sage of Omaha” because of his financial acumen, said on CNBC that health care had become “a tapeworm” for the economy.
“We have got a huge competitive disadvantage in American businesses far more important than any tax change in terms of our health care costs,” Buffett said.
He predicted the corporate trio would be more successful than the government at controlling costs. But the venture was disbanded last year with nothing to show for it.
Amazon is now trying to reduce costs by offering its employees a combination of virtual care and at-home visits — and it wants to make a little money, too, by selling that solution.
J.P. Morgan, which is expanding in North Carolina, announced in May it will invest $250 million to improve care for its employees and maybe even create a new product if they’re successful, says Morgan Health CEO Dan Mendelson.
“We are a strategic investor,” he said. “We will only invest in entities that can help us achieve our quality improvement goals and our health equity goals and our goal to mitigate cost increases to our employees in the short run and that’s what we are in it for.”
Morgan Health’s first $50 million investment is in “advanced primary care,” which encourages preventative and primary care and incorporates mental health care. Advanced primary care also rewards doctors whose patients have the best outcomes, and it minimizes the role of middlemen with direct contracting.
“We want to know that our employees are getting screened for cancer and that their cholesterol is under control and being maintained,” Mendelson said.
Mendelson says Morgan Health will also invest in digital tools to help employees find the best doctors. And it will look for ways to improve care often associated with high costs where outcomes could be better, like maternity care and treatment of back pain.
Advanced primary care is interesting to some of the country’s biggest employers, says Elizabeth Mitchell, the president of the Purchaser Business Group on Health. The group’s 39 member companies — including big names like Walmart, Microsoft and Cisco — collectively have 15 million employees, including many in North Carolina. The companies may be huge, but Mitchell says even they have difficulty negotiating down costs.
“Even though our employers are the largest employers in the world, they typically don’t have enough headcount in any one market to have adequate leverage,” she said.
Mitchell says the Purchaser Business Group on Health spent years developing and testing the advanced primary model and found employees get healthier and employers spend less on expensive emergency room visits and hospital stays. The group recently released contracting standards to help other companies figure out how to transition to advanced primary care.
But despite all these efforts, a survey of more than 300 large companies’ CEOs found 90% think the government should intervene to promote competition and price transparency. The survey, conducted last winter by the Purchaser Business Group on Health and Kaiser Family Foundation, also found more than one-third of the CEOs think the government should set limits on drug price increases.
“Any other sector relies on negotiation for pricing, and in the U.S. you can’t even do that,” Mitchell said. “So, it's not a free market situation right now.”
Savidge, the mental health clinic CEO in North Carolina, is hesitant to say the government needs to step in. But he worries about what happens if costs keep going up.
“As an employer, you reduce the amount of benefits that you can actually provide to your employees, which then creates a problem with recruitment and retention,” Savidge said. “Or it could be a business killer.”
Especially, he says, for smaller companies like his.