Over the past few years, health-care costs have increased at close to 10% per year posing a risk to the profitability of individual companies, and to our nation's economic vitality. This dramatic increase in the cost of health care has not only put pressure on companies to reduce costs but has placed tremendous pressure on employees, as they make tough health care decisions while assuming greater financial responsibility for their care. While a large percentage of the drivers of health care cost increases are outside of a company's control, the largest single driver is one that the organization can impact: individual consumption.
CLC Benefits, a program of the Corporate Executive Board estimates that individual consumption contributes to more than 40% of the overall cost of health care increases. Yet, while individual consumption of health care is the area that companies can have the most influence over, efforts to control this cost area have been marginally effective for three primary reasons.
Over-focus on health-care plan design
The first is an over-focus on health care plan design and an under focus on employee decision about how to use their health care plan. One of the dominant strategies companies are using to reduce costs and guide enrollees to make the right health care decisions is through health-care plan design. However, while benefits departments spend more than a quarter of their time on benefits design and administration, only 12% of benefits executives report being very satisfied with their plans' ability to reduce unnecessary enrollee health care spending. In fact, our findings show justification for their concerns. Despite all the company's efforts to ensure employees are in the plan best suited for their health care needs, the Corporate Executive Board found that enrollees make roughly the same number of incorrect decisions when it comes to using their health benefits, regardless of what type of plan they are enrolled in.
Trying to influencing the wrong decisions
Even when companies focus on employee decisions, they are often focused on the wrong decisions. Specifically, companies are not focused on those decisions which will make the most impact on health care costs. For example, only 15% of the increase in health care costs is related to open enrollment decisions. Post open enrollment decisions account for over 70% of the overall cost risk associated with poor decision making and increase in health care costs. This includes:
Early detection decisions (e.g. self-diagnosing based on information found on the Internet, having a health screening)
Escalation decisions (e.g. when to see a specialist, seeking higher-cost medical treatment for common and minor illnesses)
Treatment and compliance decisions (e.g. when to start/stop using medication)
Focusing on all employees equally
Finally, companies are focusing a great deal of time and resources improving the health care decision making of all their employees. However, our findings have shown that employees typically fall into one of three groups, each with different levels of understanding of health care, openness to learning about healthcare, and resulting ability to make good quality healthcare decisions. Roughly 8% fall in the "informed consumers" group, those individuals who are relatively self-sufficient when it comes to using healthcare. Just over 40% are "uninformed" and have little understanding of health care or how to make decisions within it. The group to focus on is the roughly 49% of the employee base who are "partially informed consumers." Those individuals who are thoughtful health-care decision makers but have some information and ability gaps that lead to suboptimal choices in health care.
While improving the degree to which any employee is an informed consumer can positively impact costs, our finding have shown that companies can maximize their savings by focusing their health-care education efforts on influencing the nearly informed group. In fact, by transforming partially informed employees into informed health care consumers, companies can save $1,350 in health-care costs per enrollee.
The challenge is how to transform the partially informed employee into informed health-care consumers. Successful organizations are succeeding through focused education efforts. Health-care education, in particular, presents a large opportunity for employers. Often employees find health care too complex to make informed health-care decisions or fail to make good decisions regarding their day to day health care needs. Our analysis has shown that one of the most effective ways companies can address this challenge is by providing health care decision support and educational tools to employees in order to create informed consumers.
Unlike health plan site tools which tend to address very specific medical conditions, a health care education support solution should be specifically designed to help employees and their dependents understand generally how health care, and their health plan, work and how to make good decisions across all types of heath-care situations and choices. Understanding how to decide when to visit a primary care physician rather than seeking treatment in an emergency room or seek earlier medical attention by understanding the symptoms related to problems in their diabetes treatment are critical to controlling health-care costs.
Companies which have already deployed health-care decision support and educational tools are already reaping financial benefits. For example, one global credit information company is using a health care e-learning solution to reach their entire employee base in order to provide the critical information their employees should consider before making their coverage selection. A large financial firm is leveraging health care education to combat the navigational complexity associated with health care and providing specific resources such as downloadable checklists and specific action plans on how to lead a healthier lifestyle. By targeting the health-care areas where employees have the greatest knowledge gaps and incorrect perceptions, these companies are helping ensure their employees will remember and apply their health-care knowledge to their daily health and wellness needs—driving the good health-care choices that can dramatically reduce health care costs.
More information on health-care decision support and educational tools can be found at http://hrtools.executiveboard.com/mbc/