In this episode of All Things Work, host Tony Lee speaks with Jeff Levin-Scherz, population health leader at WTW, on how employers can maintain current health care coverage for employees without breaking the bank during a time of rising inflation.
Employers continue to play an important role in providing health care benefits to large segments of the workforce and their dependents, but face serious challenges successfully containing health care costs during a time of rising inflation. In this episode of All Things Work, host Tony Lee speaks with Jeff Levin-Scherz, population health leader at WTW, on how employers can maintain current health care coverage for employees without breaking the bank.
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Tony Lee:
Welcome to All Things Work, a podcast from the Society for Human Resource Management. I'm your host, Tony Lee, head of content here at SHRM. Thank you for joining us. All Things Work is an audio adventure, where we talk with thought leaders and taste makers to bring you an insider's perspective on All Things Work.
Today, we'll be discussing the cost of healthcare benefits, and what companies can do to try to manage those costs amid fast-rising inflation. The challenge is how employers can maintain current levels of healthcare coverage for their employees, and even enhance that coverage given the current talent shortage without breaking the bank.
My guest today is Jeff Levin-Scherz. Jeff is the population health leader in the health management practice at Willis Towers Watson, now known as WTW, where he leads development of intellectual capital, and provides consultation to large employers to guide them in making strategic investments in the health and wellness of their employees.
Jeff also has been an assistant professor for more than 18 years at the Harvard University School of Public Health, where he teaches how to manage healthcare costs as well as healthcare public policy. Jeff, welcome to All Things Work.
Jeff Levin-Scherz:
Thanks very much, Tony.
Tony Lee:
We're pleased to have you, so why don't we start with, I guess the biggest issue, which is the average per employee cost of employer sponsored health insurance rose 6.3 percent last year, as many employees and their families resume care after mostly avoiding it during the pandemic. So inflation's running amok, do you think we can expect a similar increase this year?
Jeff Levin-Scherz:
Well, Tony, I'm actually worried it's going to be substantially worse this coming year and in subsequent years. So we've had a large number of years of medical inflation running at 5 percent or even a little bit less, and there are a bunch of factors. They include the fact that there's been much more provider consolidation. So providers will have both more leverage and more well deserved public sympathy at the negotiating table. So they will likely get higher rates. They also have higher costs.
We see that a lot of preventive care and chronic disease management were neglected during the pandemic. So there'll be a cost of that. There's also a cost of long-term complications of COVID. We don't know how large that's going to be. I'm worried that the government is running out of funds to pay for vaccination and for COVID therapeutics. I think we're going to be needing those for a long period of time, and those costs are going to transition to employer-sponsored health insurance.
And the cost of drugs, the good news is the pharmaceutical products that are available are better and better, but the bad news is they cost more and more. So I just want to agree with your contention up front these are going to be some very challenging years coming up.
Tony Lee:
It absolutely sounds that way. So let's start with the catch up care aspect. I mean, obviously a lot of employees couldn't get the healthcare that they needed during the pandemic. Surgery centers were closed, all of that type of thing. I mean, what type of catch up care are you seeing, and is this going to go on for a while?
Jeff Levin-Scherz:
It's hard to tease out just what we're seeing yet. I mean, clearly there were people who delayed elective orthopedic surgery, for instance. Some of those people might actually have just decided not to get it eventually. Some of those people might be getting their hip replacements in their knee replacements in coming years. So I think we'll see some of that.
There were reports in mid, early to mid 2020 that mammograms and colonoscopies were down like maybe 96 percent over the spring. They came back up somewhat, but they're still not at the levels they were at in 2019. So even though this kind of cancer screening doesn't save money overall, what happened is a lot of money was saved by not screening and not doing follow-up tests in 2020 and maybe into 2021.
And then what we'll see is that people will be diagnosed with later cancers. The real tragedy is not that it'll cost more. The real tragedy is people will die earlier and, unnecessarily lose quality adjusted life years. But as a practical matter, there will be extra costs in 2023 and beyond, even though costs were lower in 2020 and 2021.
There's already the first report I've seen from University of California Davis that showed a pretty dramatic increase in stage 4 breast cancer diagnosis in 2020 and 2021. So I think that's something to watch.
Tony Lee:
Yeah, it's amazing. The ramifications of the pandemic that we haven't even realized yet that are going to be going on for so many years ahead. One of the things that really surprised me is that small companies reported that their healthcare costs last year rose almost 10 percent, while large companies reported only a 5 percent increase. So what do you think drives that difference?
Jeff Levin-Scherz:
Yeah, I think that people often look at this and wonder, wait, are the large companies getting better deals because they can use their buying power? And the reality is that small companies and large companies are both generally purchasing healthcare through intermediaries, through health plans and those health plans are not getting different prices, mostly for the large companies versus the small companies.
I think the challenge for smaller companies in part is a selection issue where large companies tend to have very stable groups of employees, don't change very much from year to year, and that's not as true of small companies. And, therefore the risk of these new employees is unknown and leads to higher premiums.
We also see that large companies are almost universally are self-insured, and that allows them to have a single benefit across 50 states, and small companies are much more likely to be fully insured. Fully insured companies need to abide by every state's mandates, and they tend to therefore have somewhat higher costs.
Tony Lee:
So, something else interesting that's coming out of the data we're seeing, whether a company is small or large, it seems that employers are dealing with rising healthcare costs by putting some costs back on employees. Do you see that accelerating or because of the talent shortage, are they going to make it up in other places like not giving pay raises at the same level?
Jeff Levin-Scherz:
Yeah, I think it's early to tell. In the years leading up to the pandemic, we actually saw a little bit of movement away from cost shifting toward employees. So yes, there has been a large increase in deductibles and co-insurance even in 2019 compared to 10 years earlier.
But what we started to see before the pandemic was a number of companies that had gone to full replacement, high deductible health plans. Actually about 20 percent of those moved back to offering at least one plan that did not have a high deductible, and I think that there are huge concerns both in terms of talent recruitment and retention, and also in terms of affordability. Employers don't really want to only offer their employees a health plan that the employees can't afford to use because of the out of pocket costs.
So my own sense is that this will differ from industry to industry, but many companies with lower wage workers are at a point where there's not really very much opportunity to do more cost shifting to employees and to still offer a plan that allows those employees to feel confident in getting the medical care they need.
And that's what employers really want. So I think that we'll see, but one thing is for certain that lowering the actuarial value of a plan does save the employer money, and many of the other things we can posit might save money, but we don't know, and it might take a while to save money. So I think that's part of why cost shifting was pretty predominant, but I'm not sure that we will go back to seeing more of that going forward.
Tony Lee:
So, along that line, many companies are doing everything they can to try and keep employees engaged and retained, and that includes covering costs maybe they didn't cover before. Things like repaying student loan debt for example, is a good one. Do you see them addressing medical debt as more employees go back to get care? I mean, as you know, medical debt has always been a big concern among a lot of employees who are really hamstrung trying to pay those bills back.
Jeff Levin-Scherz:
Foing forward, obviously the best way to address medical debt is to be sure that people have plans that are going to offer the kind of coverage that they need. And so I think the ideal would not be to have employers help address medical debt, but it would be to have employers offer health plan policies through their benefits that offered adequate protection for employees.
Tony Lee:
Yeah. Well, let me give you an example. I mean, we just saw recently fertility benefits, they're starting to be offered by more employers, but a lot don't and you see some employees going into debt for fertility coverage. And I'm sure there are other things, but how do you see employers responding to something like that?
Jeff Levin-Scherz:
As you said, I think there has been more interest on the part of employers to offer fertility benefits. I think that there are a few important reasons for that. One is to address the needs of the talent that they want to recruit, and I think companies want to show that they are family friendly and help with family building.
I also think that an intelligently designed fertility benefit can lead to fewer babies who need neonatal ICU care and can lead to fewer multiple births as well, and multiple births are expensive and higher risk for Moms and for the babies.
So I think that some employers who are thinking about adding fertility benefits might be cautious right now because they feel less certain about what their healthcare costs are going to do over the next few years, and these benefits generally don't save money. They cost money. They just are very highly valued by many employees, and therefore it's pretty important for many employers to offer these benefits.
Tony Lee:
Yeah, it has been. So let's pivot a little bit to a trend that really just took off during the pandemic, which is telehealth. What impact has telehealth had on controlling costs?
Jeff Levin-Scherz:
Tony, this is something else where I think we will see, we don't absolutely know yet. Clearly telehealth was enormously beneficial throughout the pandemic. It dramatically increased access to mental health services, and that was pretty well timed because we had probably tripled the amount of anxiety and depression amongst American adults during the pandemic, and there was a shortage of mental health access even before.
We saw a huge uptick of virtual care for chronic disease care and for primary care and even for preventive care, and I think that's been something that's been very good. It's increased convenience. It's decreased the number of people who are spending time waiting in waiting rooms, spending money on parking at hospital doctor's office buildings and things, and obviously during the various waves of their pandemic, it kept people out of a place where maybe they could actually get COVID. So I think it's been very valuable.
There are a lot of reasons to believe that virtual care could lower healthcare costs. So for instance, if somebody has a virtual visit for an upper respiratory tract infection, they're not likely to get a chest x-ray. They're not likely to get any kind of diagnostic test, and so therefore even if the visit is paid at parody with in-person care, the total cost is lower because there aren't ancillary costs.
On the other hand, if virtual care is incredibly easy and doesn't cost a substantial amount to patients, what can happen is that a lot of these visits can be incremental instead of substituting for visits. So the people offering virtual care services will say, this is great. People can have a $79 video call rather than going and spending $1,300 in four hours in an emergency department. And that's true. But if it turns out that $79 video call is something that they basically would've just waited until the next day and felt better anyway, then it does increase cost.
It's interesting that's one of the things that happened when researchers looked rigorously at total cost associated with, with retail clinics, and they determined that so many of these visits would have otherwise not happened that the net cost was a bit higher if they didn't exist. So I think we'll see.
One other thing to mention about virtual care is that although we spend a lot of time thinking about virtual only companies, most of the virtual care that was delivered during the peaks of the pandemic was actually regular bricks-and-mortar in your community providers who moved to virtual care because otherwise there was just no other way to deliver care.
And that's good because these are people that had existing relationships and that had the ability to see people in person in the instance that the people really needed it. So we have to see how much of that continues to be available.
But I think that having more virtual care is going to be good. It's going to empower patients. It's going to mean we can have better care available. We'll have to see how much money it saves or how much extra money it costs. The jury's out.
Tony Lee:
So a lot of our listeners are smaller companies who absolutely rely on benefit brokers, and benefit brokers themselves say they're busier than ever as employers are seeking help to limit costs. So how do you see the role of brokers evolving in the time ahead?
Jeff Levin-Scherz:
I think the important thing for brokers or for consultants is to know what the real needs of our clients are. In terms of health benefits, what are the past claims like? What are the future claims going to be like? What's the competitive situation in terms of what our other companies competing for the same talent offering, and what will be most valued by employees?
Ultimately looking critically at all the various offerings, the offerings from health plans, the offerings from point solution companies that are looking to manage diabetes or manage musculoskeletal disease, look at of the cost of pharmacy and what the opportunities are there and come up with the best approach for each company, and sometimes these are substantially different.
Tony Lee:
So along that line, brokers help with pricing transparency typically. With greater pricing transparency, you start to see a little price shopping, frankly both by employees and employers. Do you see that continuing?
Jeff Levin-Scherz:
Yes, and I think that transparency is a really good thing. The fact that it's been very hard to tell what medical procedures and what medical services cost has been something which has plagued the American healthcare system. I think that recent legislation and associated regulations that require price transparency are good. It's early days of these.
In general, when journalists and researchers started looking at just what kinds of prices were being put up by hospitals and how they were being made available, they discovered that price shopping was going to be a lot more difficult than we think.
I think we also have to recognize that it's not easy for patients to price shop. Part of that is because most healthcare costs are incurred by a very small number of people. Those people tend to have a lot of medical expenses. They really need to get all their medical care in one place. They can't be hopping from place to place, and they have enough medical things going on that they really can't spend a lot of time and energy shopping. And then in terms of health plan design, they're also generally long, far beyond their out of pocket maximum. So the value of price shopping to them is probably very small.
Then even for other people, take something very simple and straightforward, like a knee or a hip MRI. I mean, radiologists might not agree entirely, but these are high quality imaging tests that are available in a whole lot of places, and there's not a lot of difference from one knee MRI to another knee MRI, but there are huge price differences.
But when researchers looked at a company that offered a good price transparency tool, had moved to a high deductible health plan, What they found is on average, people drove by six MRI centers that had lower cost before they went to the MRI center that was recommended by their physician. Now that sounds really terrible.
But on the flip side, if they decided to shop, then they'd have to be sure to not leave the MRI center without getting a disc. And then when they went back to their orthopedist, they'd have to be sure their orthopedist could actually be able to read that MRI on the disc, and it would never be in the same electronic medical record that the ortho would have easy access to both in her office and in the operating room. It's complex, and I fully support all this transparency. I'm worried about over-relying on transparency and over-relying on people making difficult decisions which actually glom up the medical system.
Tony Lee:
Well, oh my gosh. It's a complicated topic, and it's one that believe it or not, we've already run out of time on. So we'll have to have you back again, Jeff.
That is going to do it for today's episode of All Things Work. A big thank you to Jeff Levin-Scherz for joining me to discuss the effective management of healthcare costs in the workplace.
Now, before we get out of here, I want to encourage everyone to follow All Things Work wherever you listen to your podcast and listener reviews have a real impact on a podcast visibility. So if you enjoyed today's episode, please take a moment to leave a review and help others find the show.
Finally, you can see all of our episodes on our website at SHRM.org/atwpodcast. Thanks for listening, and we'll catch you next time on All Things Work.
Speaker 1:
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