Employers go to the source to tackle costs

There are growing reports that employers have reached their limit with the rising cost of healthcare and are not changing tactics to tackle the problem. This Wall Street Journal article reports that employer-provider health insurance will surpass $20,000 per family in 2019. Employers no longer believe it is possible to control the increases by simply passing along a bigger share to employees through higher deductibles (though that has worked). So, the report says, they are “looking for ways to address the underlying factors that drive up costs” and trying novel solutions. Call me skeptical, but we have seen for 30 years employers “reaching their limit,” and yet the underlying dynamics fundamentally don’t change.  However, let’s look at some of the more radical proposals supposedly taking hold in the market:

  • Employers bypassing insurers and negotiating deals with hospitals (GM, Intel, Boeing, Disney).

  • State’s employee health plan, next year wants to force hospitals and doctors to accept rates pegged to those paid by the federal Medicare program.

  • Utah state health agency paying for workers to go to Mexico to fill their prescription drugs.

  • Employers setting up clinics at the workplace and providing care directly to workers (back to the future). And the most anticipated entry of all is the Amazon’s healthcare venture (with Berkshire Hathaway and JPMorgan Chase). It’s public goal is to first solve the healthcare crisis for its own employees.

Healthcare is very humbling and so we would not want to dismiss outright any of these options a priori. But here are a few thoughts base on our 30 years of clinical and business and policy experience:

  • Employers are realizing that insurance costs simply pass through healthcare costs, so they are looking now to the source: who provides the care, where, and how.

  • These moves by employers are driven in part by the complete abdication of creativity and innovation from legacy health systems who focus on protecting their feeding troughs

  • Regulation and bureaucracy that stifles innovation and discourages trials of new business/clinical models and technology is a major, underrated factor in healthcare stagnation and rising costs that can only be addressed changes through government

  • Insurers are part of status-quo-entrenched-legacy problem - and that is why employers are increasingly bypassing them. We are bullish on clinical and health solutions that work outside of insurance.

  • Who provides the care will be critical: the days of the charismatic, all-knowing physician who at the center of decisions are coming to a close. Team-based care, alternative providers, alternative systems will emerge (if we address the barriers noted above).

Travel to other countries is an under-appreciated option that will get increasing attention.

We continue to believe in and remain bullish on the development of easy access, ubiquitous, frontline healthcare that blends digital and retail.

The legacy systems will fight to the death to maintain the status quo.

Read WSJ: Employers Change Tactics to Curb Health-Insurance Costs

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