Smart Benefits: Healthcare Is A-Changing

Smart Benefits: Healthcare Is A-Changing

According to industry expert Robert Laszewski, of Health Policy and Strategy Associates in Washington D.C., the healthcare market is in the midst of an historic shift. And it will change the business of healthcare in this country.

During his presentation last week to over 100 benefit advisors and consultants at Milliman’s annual conference, Laszewski said that, as a result of five key drivers, providers are at greater risk for the quality and cost of care, consumers are becoming more accountable for their healthcare expenses, and employers are evaluating their place in providing benefits.

5 Reasons for Change

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The five key reasons behind these changes?

• The federal debt challenge. The country's growing debt will force changes in the way healthcare is paid for. The government's interest on debt will climb from 2.2 percent of GDP to 3.7 percent by 2023. And costs for Social Security and major healthcare programs like Medicare and Medicaid will jump from an average of 7.2 percent to 11.8 percent by 2023. These increases will continue to eat up more government spending, creating more reliance on the private sector and fundamental changes in provider reimbursement.
• The shift of government healthcare programs to private sector insurers. Government healthcare programs are increasingly being shifted to the private sector. As Medicaid and Medicare enrollment continues to grow, health insurers will manage most of the enrollment for the government.
• New methods of provider reimbursement. Physicians recognize that the government is looking to overhaul Medicare reimbursement schedules. So new models of care delivery – like patient-centered medical homes and accountable care organizations – are giving doctors the ability to improve and restructure how care is delivered and paid for. Changes at the hospital system level are also expected and reimbursements will be changed there as well.
• Exchange enrollment. The Obama Administration has proven it can enroll the sick in exchanges, but it remains to be seen whether healthy people will sign up. Laszewski believes the problem is that the exchange plans don't offer consumers the value they are seeking, but rather higher deductibles, sometimes coupled with narrow provider networks (depending on the state). And the subsidies offered aren’t incentive enough. The exchanges must enroll a majority of eligibles to be viable long-term; in fact, Laszewski says 22 million will be needed by 2016 for the exchanges to make sense.
• New health insurance models. Employers are moving to new models of healthcare insurance that include defined contributions by employers (rather than defined benefits) and greater individual responsibility. Private exchanges are quickly gaining traction as employers look for ways to control their expenses and give employees the choice of plans they want.

All these changes point to one big question: will employers continue to offer insurance? Laszewski predicts an employer’s commitment to benefits will be tied to how important benefits are to attracting workers, meaning those who seek highly skilled employees will continue offering benefits.

Amy Gallagher has over 21 years of healthcare industry experience guiding employers and employees. As Vice President at Cornerstone Group, she advises large employers on all aspects of healthcare reform, benefit solutions, cost-containment strategies and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, and is often quoted by national publications on the subject matter. Locally, Amy is a member of SHRM-RI, the Rhode Island Business Group on Health, and the Rhode Island Business Healthcare Advisory Council.