Ingrams June 2023

Thought Leader Insights: Health-Care Benefit Design

Q&A ... W ith M ike B ukaty and M ary A mundsen Mike Bukaty and Mary Amundsen, sibling leaders for Bukaty Companies, wade headlong into the challenges their business clients, especially the smaller ones, face as the costs skyrocket for employer health benefits.

Q. What are you seeing or hearing with health-insurance trends that should be of greatest concern to compa nies that want to provide these benefits? AMUNDSEN: I think there is a lot of creativity in the marketplace right now, especially with a lot of new entrants. We used to refer to them as the BUCAs—Blue Cross, UnitedHealthcare, Cigna, Aetna— who you could go do as employers, but in the past couple of years, even last year, we’ve seen some creative carriers like 6 Degrees Health, for example, with a type of reference-based pricing product, using reimbursement rates based on a percent ages of Medicare reimbursement levels, or companies like Gravie. BUKATY: The way that pricing works is, if you find that Medicare pays $10,000 for a knee replacement, for example, and Blue Cross would pay $40,000, they say they’ll pay at 150 percent of Medicare. So they pay $15,000 in hopes the hospital accepts or that, or the vendor will then go to battle with the billing department to get them to accept it. You can see how that’s going to help drive costs down, but at some point, the hospital says “Wait a second, it may be OK when 3 percent of the claims coming in are through reference-based pricing, but as that catches on, we’re going to have to stop it.” BUKATY: While those vendors fight tooth and nail and win most the time, hospitals are starting to say that if you have a reference-based product, you’re not coming through our doors, other than the ER. “Why would we schedule a procedure at $15,000 when we have patients lined up for months at $40,000?” Not everybody has caught on yet; maybe 2-3 percent are using it, but the more they use it, and the hospitals pay attention to the numbers, we’ll see more pushback. Q: What are the downsides of that process?

Q: That can lead to some issues for employees after treatment, can’t it? BUKATY: If I got into a hospital to get a knee replaced, and I get a bill that says I owe $40,000 but the insurance company sent $15,000 and I’m responsible for the balance, I have to take that letter to the employer or vendor and have them fight for me. A lot of folks don’t like to get those letters at home, so businesses have to train their employees to remain calm, not worry about thinking their credit is ruined. It’s not perfect by any means. BUKATY: A lot are still using the PPO platform, but they are paying a lot for procedures people have held off on. If I had to have an MRI at $1,500 and decide not to because of the cost, then not follow up with my doctor, four years later my knee replacement might be eight times the cost. So you have some that are saying, let’s pay for up-front costs, doctor’s office costs beyond well ness checks, pay for the generic pharma, pay for that MRI or CAT scan, X-ray, blood or lab work, all at 100 percent. They believe it’s like dental care: You get your teeth cleaned twice a year, it keeps you out of the chair. If they can cover this stuff up front, it won’t turn into a big claim three or four years down the road. BUKATY: Maybe, but we have eight or 10 groups with it, and the vendor is com mitting to a 7 percent rate increase, and they are delivering on 5-7 percent over the last 10 or 12 moths. The concept might be proving out, and it’s still early, but can see how it could make sense to get people healthier. Q: In what other ways are insurers implementing change? Q: That’s a pretty big bet to be mak ing, isn’t it?

Q: Are there other innovations on the carrier end? AMUNDSEN: The so-called captive plans have been around a long time, where business owners are sharing the risks. And carriers are staring to be more creative as well—policies with limited networks (and) plans that don’t pay for out-of-network care at all. Everybody is searching for ways to keep those costs down. BUKATY: In a phrase, large claims, but break that down. We’re not going broke by doing tubes in kids’ ears, having their tonsils out, or even delivering babies. Those are always in line. What we are seeing now are procedures that run $500,000 to $1 million or more, fighting cancer, large claimants with gut or heart issues who 20 years ago, maybe that person would not have survived. Today, that person survives after being in the hospital 30 or 45 days. It’s not the nickel and-dime claims catching up with carriers. It used to be about 80 percent of claims came from 25 percent of the people; now they’re coming from 14 or 15 percent. Q: Any other cost drivers? BUKATY: High-cost prescriptions especially with biosimilars. We have one group where a covered child needed a drug that cost $50,000 a month. How do you recoup $600,000 within a 40-person group? It’s with a large rate increase. AMUNDSEN: It’s interesting how we’ve made tremendous advances in the medical field, but whether it’s with biolog ics or hospital machines that will do MRI, CT scans and X-rays all at once, those machines cost in the millions. So we’ve got these technological advances improv ing the quality of life, even the extension of life itself, but that comes with a very high cost. Q: So what factors are driving in- creases?

60 I ngr am ’ s

June 2023

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