Late last year as part of a $1.8 trillion omnibus spending deal, President Obama signed into law a two-year delay of the Cadillac Tax, the 40-percent excise tax on employer-sponsored health coverage that exceeds $10,200 for individual coverage or $27,500 for family coverage. This came as a relief to many large employers, almost half of which were expecting to be impacted by the tax, according to a 2015 survey from the National Business Group of Health.
Although the tax won’t take effect until Jan. 1, 2020, employers still need to take important steps now to ensure the health coverage available to employees and retirees in 2020 won’t trigger the Cadillac Tax.
It is important to remember that the tax does not only apply to the employer-paid portion of health insurance premiums. It encompasses the aggregate cost of the employee benefit, which includes not only employer-paid premiums but also tax-free employee contributions to premiums, contributions to a flexible spending account or health savings account, and employer contributions to a health reimbursement account.
In short, as healthcare costs continue to rise an average of 5 to 7 percent per year, more and more health plans will fall into the category of “high-value” and therefore likely trigger the Cadillac Tax. Evaluation of plan design and benefit levels is important; however, employers must also take steps to reduce their overall healthcare spend if they are to avoid the tax implications in 2020.
Fortunately, the field of predictive analytics and technology solutions like Geneia’s Theon® advanced analytics and insights platform that are now available can help employers better understand their healthcare cost drivers and take steps to reduce them.
As ‘big’ data sets are pooled together, you can begin to see relationships or correlations between factors. When those correlations are strong enough, you can begin to predict probable future events. Predictive analytics can provide an early indication of healthcare spend, enabling employers to act and impact or potentially reverse upward trends.
There are many sources of employee data that are helpful in this regard, including but not limited to employee health-risk assessments and biometric screenings, claims data, pharmacy information, data from HR systems and more.
Once you have a good sense of the data available to your organization, you can begin to drill down into the details, predict possible future utilization and risk, and take steps to mitigate these trends. Here are 10 ways your organization can evaluate (and potentially control) healthcare spend.
1. Compare plan costs to other employers.
Knowing how you compare to your peers in terms of your risk-adjusted employee population data and benefit plan design will help you evaluate how well you’re managing your healthcare spend.
2. Analyze demographics within your employee population that may drive utilization.
The social determinants of health – age, gender, race, ethnicity, marital status, education, income – can have a larger influence on an individual’s health than the care he or she receives and will impact your organization’s healthcare cost trends.
3. Assess frequently accessed providers and places of service.
Learn as much as you can about your provider network to identify opportunities for your employees to receive quality and cost-effective care. This will also help you identify barriers to receiving care, such as lack of public transportation to reach provider offices.
4. Identify missed opportunities for your employees to receive appropriate preventive care.
Knowing which employees need and would benefit from routine preventive care such as blood pressure checks, diabetic screenings, mammograms or colorectal screenings could help defray future costly conditions. This also provides you an opportunity to educate your employees that these services don’t carry a copay.
5. Analyze and compare the use of in- verses out-of-network services and generic verses brand-name medications.
Use of out-of-network providers and brand-name prescription drugs adds considerably to the cost of healthcare. Educating your employees about the price difference between in- and out-of-network and generic and brand-name drugs will save money for you and your employees.
6. Identify employees that could lower their risk for chronic conditions by making lifestyle changes.
Lifestyle choices account for 50 percent of what determines an individual’s need for healthcare services. Identifying employees who smoke or who are overweight and providing resources such as counseling or access to smoking cessation or weight management programs can help mitigate rising healthcare costs and contribute to a healthier workforce.
7. Analyze available quality information.
Knowing and steering your employee population to high-quality providers will lead to better outcomes and overall lower healthcare spend.
8. Evaluate where and why employees receive healthcare services and determine what conditions could be better treated and managed through less-expensive outpatient services.
Are your employees using the emergency department when they could see a primary care physician or go to an urgent care center, both of which are less expensive and more appropriate places of care? Could they use a free-standing laboratory for routine blood work instead of a lab located within a large health system? Helping your employees understand how and where to seek appropriate care for certain conditions will impact the amount spent on services.
9. Determine how engaged and active your employees are in managing their healthcare and participating in wellness programs.
You have an opportunity to increase participation in wellness programs and increase your employees’ engagement in their overall health by analyzing data and understanding potential barriers.
10. Identify prevalence of knee, hip and back surgeries and related physical therapy.
Data shows the cost of these procedures can vary greatly among providers and facilities. As these are common conditions, knowing which providers and facilities are the most cost-effective and also have the highest quality scores can have a large impact on overall healthcare costs. In addition, there may be opportunities to improve your work site, purchase more ergonomic equipment or improve safety training if you discover a lot of employees with certain joint or muscle conditions.
Using the information available to you and following these 10 tips to evaluate your healthcare cost drivers can help you develop and implement strategies for better controlling your spend. This is not only important for managing your bottom line but it will also help ensure you stay under the “high-value” health plan threshold and avoid the Cadillac Tax in 2020.