As I write this blog, I find myself frustrated with by the never-ending hand-wringing about the health care affordability crisis and the unsustainability of the cur rent benefit models for both employers and their employees. The time for action is now. It is my fervent belief that the opportunity for a paradigm change does exist and that we are rapidly approaching the tipping point; that valuable analogs exist and can guide us, and that there are offerings and platforms in the marketplace that can be repositioned or refined to enable the needed re-anchoring of the benefit commitment to a more stable care delivery model.


To that point, I believe that this article can offer a useful guide on how we can approach the question surrounding health care affordability anew. In doing so, it will build the framework for a new approach that will reset misaligned employee expectations and deliver healthcare solutions that are both affordable and demonstrably improve patient outcomes and experiences.  


Current Situation

The current benefits promise (or construct) between employer and employee is hollow at best for many Americans, as evidenced by the lack of affordability for both employers and their employees. For an employee earning even $60,000 a year, supporting a family is difficult enough without having to endure the multi-thousand dollar out-of-pocket costs for the increasingly “skinny” health plan benefits provided them by their employers.


Sure, there are pockets — particularly in tech — where current economic strength and an ongoing war for talent have temporarily insulated those employers and employees from the issue. Lest we put our head in the sand, the raging national debate and push by most of the Democratic presidential contenders for Medicare For All should serve as clear evidence of the problem.


Central Question

How do we reframe the employee benefits promise in a way that employers can deliver a credible offering that is affordable, given the current realities of the healthcare marketplace, and effectively addresses employees’ needs from an affordability, quality, and access perspectives?


Historical Context

Immediately after World War II, there was an implicit social contract with employees based on rewarding a lifetime employment commitment with a defined benefit retirement plan and pre- and post-retirement healthcare. By the late 1980s, however, 401k plans had led to the death of defined benefit pension plans, FAS 106 to the demise of retiree medical, and increased cost-sharing to the ever-diminishing value health plan offerings. No wonder employees were uncertain what their expectations should be. Managed care offerings that featured a point of service (POS) plan design emerged as a response to the need for a viable alternative to the existing paradigm.


After the dot com meltdown in March 2000 and the September 2008 financial crisis, we saw similar efforts to address escalating costs: in the first case with consumer-directed healthcare, and the second with digital health offerings and direct care delivery models. Each of these evolutions was based on the notion of providing consumer choice while still anchoring the basic benefit commitment to an ever-narrower network and adhering to increasingly complex and often cumbersome rules for coverage and reimbursement.


To illustrate the point of just how challenging this has become for consumers, one has to look no further than the rise of a generation of navigation and advanced second-opinion companies such as Accolade, Castlight, Grand Rounds, and Quantum, all of which have become necessary to help guide and support consumers directly.


Here’s the bottom line: Current employer health management strategies and their over-reliance on cost-shifting have run their course, and there is scant room to raise deductibles and coinsurance for consumers who increasingly look to finance their out of pocket expenses. We need to take a fresh look at the problem, develop a more sustainable approach, and ultimately re-anchor the benefit commitment.


Complicating Factors

There are several impediments that constrain both the way the problem is framed and the solutions that are presented.


These include:

  • The misalignment of incentives in our current health care “fee for the service” system where providers get paid to do more rather than for delivering superior outcomes.
  • The power of incumbency where the entrenched players — both payers and health systems alike – are disinclined to do anything that negatively impacts their near term economic interests.
  • The consolidation of health systems, which has resulted in a concentration of power and higher, not lower, costs.


The Tipping Point

Inevitably, too, we will be forced to wonder whether we’re ready for a paradigm change. It’s a fair question — and my response is no, at least for now.


Having said that, the tipping point is not too far in the future.  Experience has taught us that the confluence of two factors creates that tipping point. The first is an inflection in healthcare costs where incremental cost management strategies are either ineffective or untenable. The second is the advent of an economic downturn, wherein senior management challenges the benefits community to rethink their underlying assumptions of design, network, cost sharing, etc.


Managed Care 1.0  > Next Generation Personalized Care Model (PCM)

To pick up on the analog of the shift to managed care and rise of consumer-directed care programs: there are some interesting parallels. At the inception of managed care, the employer shifted their benefits commitment from a fee-for-service/PPO model into a managed care network wherein the employee had their pick of providers but were required to pay the actuarial difference should they choose to go outside that network.


Under the next generation offerings advanced and/or enabled by companies like Centivo, Collective Health, and Bind, employers will have the opportunity to drive a step change improvement in quality and affordability by:

  1. Providing the critical navigational support to help guide the individual journey with the goal of optimizing for cost and quality based on their unique needs but
  2. anchoring the new benefit commitment to a more highly curated set of providers who commit to evidence-based care guidelines and accept accountability for the outcomes.  


Yes, the employee retains choice but has a tougher economic decision — they can either participate in the curated network with a demonstrated quality and benefit both from navigational support and demonstrably lower out of pocket costs, or not. Should they choose not to play, there will be economic consequences. I think this approach has a far better chance of success than waiting for health systems and payers to curate their own networks and more aggressively manage referral patterns. Shifting employees away from low-performing providers and towards high-performing ones should be best practice, coming as it does with material benefits in both cost-avoidance and enhanced care quality.


I’ll illustrate the problem and opportunity via a personal example. Recently, I saw a presentation at an Employer Health Innovation Roundtable (EHIR). At this roundtable, much of the conversation revolved around the material costs that were incurred as a result of the disproportionate use of low-quality high-cost providers, a lack of adherence to acknowledged care guidelines and the inability payers to hold the big health systems accountable for policing problematic providers. One of their members shared that over a third of their employees were disproportionately using low-performing/low-quality providers. Of those providers, between 2% and 3% were sanctioned — and yet remained in the network. It’s no surprise that these providers and the care they directed contributed directly to higher cost or less-than-optimal quality.  This is the problem, but also the opportunity.


Accelerating Market Adoption

So, what will drive this paradigm shift to these next-generation health plans and care delivery models? I believe that there are six key factors.


  • Financial Crisis – We need a precipitating event. I wish it weren’t so, but that seems to be a critical factor.
  • Higher-Order Framing – This is not an incremental shift; it requires a step change. As such, it needs to be framed in a higher context that enables the decision-maker to understand both the magnitude of the problem and why the incumbents are unwilling or unable to make the journey. While the notion of  “re-anchoring” an employer’s benefit commitment may be a bit esoteric, it captures the magnitude of the problem and the opportunity to tie into the new national dialogue.
  • Definition of “It” and Key Attributes – It is important that “it” (the new care model) is defined as a new category with a catchy acronym like PCM (Personalized Care Model design), that has a specific set of attributes that distinguish it from the existing PPO and POS managed care programs approaches.  
  • Impact Model – We need to develop a financial model that enables the employer to estimate the economic impact of adopting the above-mentioned approach. This model would use existing demographic and utilization data as well as savings assumptions generated by the adoption of care paths for specific chronic conditions, and more predictive AI tools.
  • Market Adoption – It’s important to engage in existing and new partnerships with key thought leaders at benefits consulting firms, innovation forums like EHIR, and other major players to establish credibility of the new models and accelerate adoption.


Where do we go from here?

I have a few thoughts.


First, it is imperative that there be a call to action and a recognition that the current incremental solutions aren’t delivering and can’t be expected to deliver real affordability.  


Second, the emerging players advocating for the new paradigm need to demonstrate proof of concept for the early adopters.  


Third, these early adopters need to evidence the sustainable financial impact of their intervention, and then translate that proof into a user-friendly impact model that can enable employers — and their financial executives specifically — to demonstrate a meaningful P&L impact.


Fourth, we need to be poised to take full advantage when the inevitable downturn does occur to accelerate the new health benefits paradigm.  


As the former Obama Chief of Staff, Rahm Emanuel is famously quoted as saying during the 2008 meltdown: “You never want to want a serious (financial) crisis go to waste.”  


Let’s ensure that it doesn’t.