Employer Health Plans: Keys to Lowering Cost, Boosting Benefits

Employer Health Plans:
Keys to Lowering Cost, Boosting Benefits

© 2018 Health Catalyst
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Employer Health Plans: Key to Attracting Talent
In May 2018 U.S. unemployment reached
3.9 percent, a low not seen since 2000, and
not sustained since the late 1960s.
Joblessness is hitting its lowest rates in
decades, giving potential new hires a lot of
career options and challenging employers to
rethink their strategies for finding, hiring, and
retaining a great workforce.
To attract talent and keep them on board in this competitive job market,
employers must look for tactics to increase the value of their opportunities
to job candidates.
Employers can make their offers standout by offering low-cost employee
healthcare with extensive benefits.

Managing Employee Health for More Benefits, Lower Cost
To manage healthcare costs over the past
50 years, executive teams have slowly
pared down benefits each year to meet
annual cost goals, rather than addressing
employee population health management.
Historically, health plan success has
meant receiving only a 5 percent
annual increase in healthcare
insurance premiums, instead of
a 7 percent increase.

Executive teams who continue to employ a benefit-
cutting strategy are reaching its boundaries.
If they continue to take away benefits, employee
retention will plummet; if they maintain or raise
benefits without managing employee health, costs
will be too high for a sustainable business model.
To improve healthcare benefits while lowering
benefit costs, organizations must understand
and accept one key fact: to manage the
healthcare costs of an employee group,
employers must get involved in the health
of that employee group.

To improve healthcare benefits while lowering benefit costs,
organizations must understand and accept one key fact:
To manage the healthcare costs of
an employee group, employers
must get involved in the health of
that employee group.

Historically, executive team have avoided
health management of employee groups
for two main reasons:
1. Aversion to Unpredictable Costs
2. Lack of the Right Data, Data
Infrastructure, and Analytics Tools

Aversion to Unpredictable Costs
Healthcare is complicated, and most business
owners and leaders view it as a necessary but
costly expense–unpredictable and hard to control.
Business leaders dislike unpredictable costs,
especially those that are a material part of their
business and show no signs of stabilizing.

Aversion to Unpredictable Costs
Healthcare costs make up a large percentage of
an organization’s fixed costs, as employers must
provide health insurance for team members.
Without a good way to understand, rationalize,
or reduce healthcare costs, these costs are
totally unpredictable.

Lack of the Right Data, Data Infrastructure, and Analytics Tools
Most leaders don’t know how to articulate the
process of building a sustainable and attractive
health plan that addresses and minimize challenges.
Until the last five or so years, the right data
strategies haven’t been around to effectively address
employee population health and the consequent
challenges of employer health plans.
However, new technologies and attitudes
toward managing healthcare in the corporate
setting continue to grow and evolve.

Shifting Workforce Attitudes Towards Benefits
Employee attitudes towards benefits and the work
environment are shifting as younger generations
enter the workforce. Millennials think about the
workplace differently from Gen Xers, who think
differently from Baby Boomers.
In a 2014 survey by Bentley University of 1,000
Millennials, 96 percent rated healthcare benefits
as a key factor in deciding between two
otherwise equal job opportunities.

Glassdoor reported in 2015 that 89 percent
of employees aged 18–34 would prefer new
or additional benefits over a pay raise, and
the most highly valued perk was additional or
enriched healthcare.
Millennials will comprise 75 percent of the
workplace by 2025, making their outlook an
important consideration for employers today.

The obvious solution for employers is increasing
employee benefits with an emphasis on
enhanced healthcare.
Carrying out this strategy isn’t so straightforward,
however, as healthcare tends to already be a
top, and rising, expense for employers.

For employers with more than 200
employees, healthcare insurance premiums
increased, in absolute terms, by 329 percent
over the past 18 years (1999–2017)—or by a
compounded average annual (CAGR) rate of
6.8 percent each year.
Healthcare expenses are typically among the
top three highest expenses for a business.

Meanwhile, the demand for qualified talent
under low unemployment rates means that
workers can afford to selectively choose a
place to work based on aspects beyond
salary, such as the organization’s mission,
environment, and benefits.

Transforming Employer Health Plans with a
Cultural Shift and Data-Driven Process Change
Some of these enhanced benefits are cultural
(mindset) shifts that require little investment;
others require real dollars to work.
For example, by crafting thoughtful changes
in plan design organizations can drive
tangible savings by directing employees to
more appropriate, lower cost alternatives.
However, educating employees to think about
whether they truly need the ED when a PCP
or urgent care will suffice is a mindset shift
that can take a lot of time and energy.

Transforming Employer Health Plans with a
Cultural Shift and Data-Driven Process Change
Moving a company from a traditional fully
insured coverage plan to a self-funded plan
will require careful analysis of the downsides,
as material dollars will now be in play and
potentially at risk.
An executive team must balance these real
market forces against the material investment
needed to implement the change, while still
running an efficient, sustainable business.
Businesses need vital understanding of how
their workforce uses healthcare services—
understanding they can find in corporate
healthcare data.

Data Unlocks Lower Employer Healthcare Costs
and Better Benefits for Employees
Unleashing corporate healthcare data, learning
from it, and implementing against those learnings
can lower the cost of employee/employer
healthcare while increasing the total benefits
value for employees.
This is how Health Catalyst moved from a fully
insured/unmanaged organization to a self-
insured/fully managed organization in less than
five years.
During this period, Health Catalyst also
reduced its healthcare spend by more
than 20 percent, while increasing the
offered benefit in real and significant ways.

Health Catalyst started its move to a self-insured
organization by aggregating employee health
data in a formal and governable way.
With this data, even the most basic analysis
work (such as comparing various slices of
the data on a per-member-per-month cost
basis, both to historical performance and
national benchmarks) drove real insights
into areas of improvement.

For example, Health Catalyst used the data to confirm its
intuition on a couple of hypotheses about its population:
Relative to benchmarks, its employee population
was much healthier, with fewer chronic conditions
and fewer large claims, as a percent of total spend
relative to other companies of its size.
The majority of team members (65 percent) were
paying for an insurance plan (a traditional PPO) that
they underutilized because they were basically healthy.
>
>

Health Catalyst decided to encourage team
members to take part in its HSA plan and
made the plan cost very favorable over the
traditional PPO.
In one year, utilization of the HSA went from
35 percent to 93 percent.
Team members were able to put the dollars
they would have spent on a traditional PPO
into their HSA accounts.

The next year’s cost review showed lower
expenditures than Health Catalyst had
anticipated and budgeted for.
This gave Health Catalyst the confidence to
include additional benefits in the new year
without increasing rates.
From a team member retention standpoint, the
organization was able to send the powerful
message to its workforce:
• Thanks to cost savings from the year before,
healthcare premiums wouldn’t increase, and
the organization would add five new benefits
to the plan.

The Right Data at the Right Time
To access accurate data in an appropriate way at
an appropriate time, Health Catalyst moved from
doing most of its employee health data work on
an ad hoc, manual basis to incorporating its
strategy into a broader data platform.
The organization leveraged its full suite of
relevant applications against its Data
Operating System (DOSÔ) solution, with
particular emphasis on a shared claims data
mart for a holistic view of which procedures,
treatments, and pharmacy costs drive spend
within the employee population.

The Right Data at the Right Time
This data helped Health Catalyst make more
informed decisions about introducing financial
incentives to drive better behavior and cost-
effective solutions that didn’t sacrifice quality.
At the same time, Health Catalyst was able to
maintain the same overall level of benefit for
team members.
Two key methods emerged for reducing
health plan cost while enhancing benefit.

Two Ways to Reduce Benefit Cost
While Raising Benefit Value
Employers can reduce benefit cost while raising benefit value in two ways:
• Manage Easily Fixed Cost Issues
• Use Healthcare Cost Savings to Fund Expanded Benefits
By managing easily fixed cost issues, employers can
lower their expenses more efficiently.
Using a flashy user interface is a tempting way to
get employees to buy into new policies, but the
best cost savings are generally simple, such as
driving more people to lower cost providers.

Two Ways to Reduce Benefit Cost
While Raising Benefit Value
Use Healthcare Cost Savings to Fund Expanded Benefits
Many executive teams are happy to use cost savings
to fund richer benefits. For example, over four years,
Health Catalyst dropped its annual spend by more
than 20 percent.
It invested those savings into areas such as
improving the benefits in certain aspects of its
health, dental, and other healthcare plans.
The positive cycle helped the organization
better manage its collective health, which
translated into lower costs and a return
that greatly exceeded expectation.

Lower Employee-Related Costs:
A Reality with Data-Drive Health Management
With data-driven analytics and leadership that actively
manages the health of employees, organizations can
effectively manage the large and growing
expense of employee health plans.
Rather than using gains in this area simply
as cost reductions, many forward-thinking
organizations put cost savings back into
richer employee benefits.
This creates a positive cycle of employee
reward (more benefits) that will position
employers to attract and retain talent in
this competitive job market.

For more information:
“This book is a fantastic piece of work”
– Robert Lindeman MD, FAAP, Chief Physician Quality Officer

More about this topic
Link to original article for a more in-depth discussion.
Employer Health Plans: Keys to Lowering Cost, Boosting Benefits
Employee Wellness: A Combination of Personal Accountability and Corporate Responsibility
Jeff Selander, Chief People Officer
Three Essential Systems for Effective Population Health Management
Jared Crapo, Sr. VP
Build a Mission-Driven Culture in Healthcare
Jeff Selander, Chief People Officer
Healthcare Analytics Platform: DOS Delivers the 7 Essential Components
Imran Qureshi, Chief Software Development Officer
How to Assess the ROI of Your Population Health Initiative
Bobbi Brown, MBA, Sr. VP

Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
Currently serves as the Chief People Officer for Health Catalyst. In this role Jeff is
primarily responsible for the culture, values, HR, and administrative aspects of the
business. Prior to this Jeff served as the Chief Financial Officer for Health Catalyst for
four years. Prior to joining Health Catalyst, Mr. Selander was CFO at HB Ventures, a
private equity firm in Boise, Idaho. Health Catalyst is Jeff’s fifth start-up as a venture
finance professional, and his third as CFO.
During his career, Jeff has assisted CEO’s in raising over $250 million in debt and equity from
institutional investors. Prior to HB Ventures, Jeff was the CFO for Great Basin Scientific, a pre-
revenue life sciences start-up. Previous to Great Basin, Jeff played several senior finance roles for
iBAHN Corp., a venture-backed high-speed Internet provider to the hospitality industry. Mr. Selander
holds an MBA from the F.W. Olin Graduate School of Business at Babson College, Boston,
Massachusetts and a BA in international relations from BYU.
Jeff Selander

Employer Health Plans: Keys to Lowering Cost, Boosting Benefits

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