12
Employers and Employees

Coordinator


Veronica Goff, National Business Group on Health


Other Contributors


Kathy Buto, Johnson & Johnson; Cecily Hall, Microsoft; Ann Kempski, Service Employees International Union

SECTOR OVERVIEW

Sixty percent of U.S. employers provide health insurance, covering nearly two-thirds of Americans under age 65 years (Stanton, 2004). Companies with more than 200 employees are more likely to offer health benefits (99 percent) than companies with less than 10 employees (45 percent). About 40 percent of the employer market is self-insured, covering about 55 million people.

Over the last 10 years, employer healthcare expenditures rose 140 percent (Mercer Health & Benefits Evolution and Revolution: Benefit Trends, 2007). Large employers spent an average of $8,424 per employee per year on health care in 2006 (Mercer Health & Benefits Evolution and Revolution: Benefit Trends, 2007). Among all employers, the average annual costs for single and family coverage in 2007, including employer and employee contributions, were $4,479 and $12,106, respectively (Claxton et al., 2007).

Over the next decade, healthcare spending is expected to rise 7 percent annually, about twice the rate of overall inflation (CMS, Office of the Actuary, 2007). Corporations report that they cannot drive down business costs and optimize margins enough to keep absorbing these increases (Darling, 2007), and employer-sponsored insurance is eroding as a result. The percentage of workers covered by employer-sponsored healthcare benefits dropped to 59 percent in 2006 from a high of 65 percent in 2001 (The Kaiser Family Foundation and Health Research and Educational Trust,



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12 Employers and Employees Coordinator Veronica Goff, National Business Group on Health Other Contributors Kathy Buto, Johnson & Johnson; Cecily Hall, Microsoft; Ann Kempski, Service Employees International Union SECTOR OVERVIEW Sixty percent of U.S. employers provide health insurance, cover- ing nearly two-thirds of Americans under age 65 years (Stanton, 2004). Companies with more than 200 employees are more likely to offer health benefits (99 percent) than companies with less than 10 employees (45 per- cent). About 40 percent of the employer market is self-insured, covering about 55 million people. Over the last 10 years, employer healthcare expenditures rose 140 per- cent (Mercer Health & Benefits Evolution and Revolution: Benefit Trends, 2007). Large employers spent an average of $8,424 per employee per year on health care in 2006 (Mercer Health & Benefits Evolution and Revo- lution: Benefit Trends, 2007). Among all employers, the average annual costs for single and family coverage in 2007, including employer and employee contributions, were $4,479 and $12,106, respectively (Claxton et al., 2007). Over the next decade, healthcare spending is expected to rise 7 percent annually, about twice the rate of overall inflation (CMS, Office of the Actu- ary, 2007). Corporations report that they cannot drive down business costs and optimize margins enough to keep absorbing these increases (Darling, 2007), and employer-sponsored insurance is eroding as a result. The per- centage of workers covered by employer-sponsored healthcare benefits dropped to 59 percent in 2006 from a high of 65 percent in 2001 (The Kaiser Family Foundation and Health Research and Educational Trust, 29

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29 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE 2006). Retiree healthcare coverage was offered by 35 percent of large employers in 2006, down from 66 percent in 1988 (The Kaiser Family Foundation and Health Research and Educational Trust, 2006). Cost is only part of the problem, however. Wasteful spending and poor outcomes because of the overuse, underuse, and misuse of healthcare services have employers’ attention. National business organizations have worked to improve quality and manage costs for more than 30 years. Among them is the National Business Group on Health,1 established in 1974 at the urging of the Business Roundtable.2 The National Committee on Evidence-Based Benefit Design is a recent initiative of the National Business Group on Health whose mission is to improve the quality of care and promote value by using benefit designs that encourage and reward the provision of effective care and that discourage the provision of ineffective care. Regional and community-based coalitions, led by the National Business Coalition on Health,3 took root in the early 1990s. More recently, sev- eral business-led organizations have used combined purchasing leverage to advance quality, safety, and efficiency reforms; most notable among these are the Leapfrog Group,4 Bridges to Excellence,5 and Care Focused Purchasing. Employees bear the cost of the inefficient healthcare system directly. 1 The National Business Group on Health, which represents 272 large employers, including 65 of the Fortune 100, is the nation’s only nonprofit organization devoted exclusively to find- ing innovative and forward-thinking solutions to large employers’ most important healthcare and related benefits issues. Business Group members provide healthcare coverage for more than 55 million employees, retirees, and dependents. See http://www.businessgrouphealth. org. 2 The Business Roundtable is committed to advocating public policies that ensure vigorous economic growth, a dynamic global economy, and the well-trained and productive U.S. work- force essential for future competitiveness. The Business Roundtable believes that its potential for effectiveness is based on the fact that it draws on chief executive officers directly and personally and presents government with reasoned alternatives and positive suggestions. See http://www.businessroundtable.org. 3 The National Business Coalition on Health (NBCH) is a national, nonprofit, membership organization of nearly 70 employer-led coalitions representing more than 10,000 employers. NBCH and its members are dedicated to the value-based purchasing of healthcare services through the collective action of public and private purchasers. NBCH seeks to accelerate the nation’s progress toward safe, efficient, and high-quality health care and the improved health status of the American population. See http://www.nbch.org. 4 The Leapfrog Group is a voluntary program aimed at mobilizing employer purchasing power to alert America’s healthcare industry that big leaps in healthcare safety, quality, and customer value will be recognized and rewarded. Among other initiatives, the Leapfrog Group works with its employer members to encourage transparency and easy access to healthcare information and rewards hospitals that have a proven record of providing high-quality care. See http://www.leapfroggroup.org. 5Bridges to Excellence is a not-for-profit organization that designs and creates programs that encourage physicians and physician practices to deliver safer, more effective, and efficient care by giving them financial and other incentives to do so. See http://www.bridgestoexcellence.org.

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299 EMPLOYERS AND EMPLOYEES RAND Corporation researchers found that patients receive the recom- mended care only about half the time (Asch et al., 2006). Meanwhile, tens of thousands of people die each year in hospitals because of preventable mistakes (Institute of Medicine, 2000). Employees are also paying more for their health care. Although the share of premiums that employees pay has held relatively steady (in 2007, the average split for employers and employees was 79 and 21 percent, respectively), employees’ annual out-of-pocket spending (premium and point-of-care cost sharing) rose 12 percent in 2006 to an average of $3,065 (Hewitt Health Value Initiative, 2006). At the same time, wages are stag- nant as employers spend their resources on health care instead. Employers and employees have much to gain by encouraging evidence- based medicine: improved quality of care and improved outcomes by adherence to • clinical guidelines and through the appropriate use of services and medications; reductions in errors and adverse medical events; • potential cost savings through reductions in ineffective care, • unproven treatments, and interventions that are unnecessarily costly; and greater patient satisfaction through informed involvement in health- • care decisions. ACTIVITY CATEGORIES Many employers are already active in applying medical evidence and use four levers at their disposal: Provider contracting. Vendor selection and the rewarding of • vendors allow the incorporation of evidence-based medical stan- dards into the care that vendors provide employees. Benefit design. Differential coverage encourages the provision of • effective care and discourages the provision of ineffective care. Employee decision support. Tools and resources assist employees • with being more discriminating healthcare consumers and help them make decisions informed by evidence of effectiveness and risk-benefit profiles. Public policy advocacy. Advocacy helps support comparative effective- • ness research, patient safety, and health information technology. These activities, which are more thoroughly described below, are options that employers and other sponsors of healthcare plans can use.

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00 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE Large, self-insured employers have more freedom to employ these tech- niques than small and midsized employers buying insured products. How- ever, the efforts of large employers often result in system changes that benefit small and midsize employers, too. Not all large employers are alike, however. Some of these approaches fit within an employer’s benefits mission, whereas others do not. Experi- ence shows the greatest chance for meaningful, sustainable change comes when employers combine their purchasing power behind specific activities, as noted in the examples in the next section. Provider Contracting Provider contracting allows employers to give preferential status to hospitals that meet evidence-based healthcare quality and safety standards. Preferential status might entail an in-network or center of excellence desig- nation, increased reimbursement, or reduced employee cost sharing when an employee chooses a recognized provider. The Leapfrog Group, the 5 Million Lives Campaign, and the Surgical Care Improvement Project are examples of programs with standards that may be incorporated. For example, the Leapfrog Group began collecting hospital healthcare practice data in 2001. Now, more than 1,300 hospi- tals in 33 regions participate in the annual survey. In September 2007, 41 hospitals were designated “Leapfrog top hospitals.” These hospitals were recognized for their practices in four categories, including evidence-based hospital referral, which assesses how well hospitals perform seven high-risk procedures and how well they care for infants with three high-risk neonatal conditions (The Leapfrog Group, 2007). Provider contracting also allows employers to give preferential status to physicians and practices that have been recognized for excellence, for example, by the National Center for Quality Assurance (NCQA) Physician Recognition program, the NCQA Physician Practice Connections program, and Bridges to Excellence programs. For example, Bridges to Excellence programs encourage physicians and physician practices to deliver evidence-based care through the provision of financial and other incentives. Employers work with national insurers, which all have licensed Bridges to Excellence programs, to implement three programs: Diabetes Care Link (which offers bonuses for evidence-based • diabetes care), Cardiac Care Link (which offers bonuses for evidence-based cardiac • care), and

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0 EMPLOYERS AND EMPLOYEES Physician Office Link (which offers bonuses for investments in • information technology and automated care management tools). Another example is the employer and carrier-led Care Focused Purchasing initiative (which has 55 national employers and seven national and regional carriers), which is using existing industry standard provider performance metrics (many of which are based on evidence of effectiveness) to support providers in continual quality and efficiency improvement efforts and educate consumers at the point of need (Care Focused Purchasing Inc., 2007). Employers may also require insurers or third-party administrators to report on how evidence is applied to treatment decisions and how they align their treatments with the evidence (whenever possible). They should report the following: the process that they use to evaluate new treatments; • the process that they use to apply new evidence to current coverage • policies; how physicians are encouraged to make evidence-based decisions • and to use clinical guidelines; how the application of evidence-based medicine leads to quality • and efficiency improvements; the percentage of providers meeting the patient safety goals of the • Joint Commission, the National Quality Forum, and the Leapfrog Group; and the percentage of hospitals participating in the 5 Million Lives • Campaign. Employers may also use evidence-based privileging and quality stan- dards whenever possible. For example, an employer may contract only with imaging providers who meet specific standards. If there are not enough providers who meet those standards, employers may pay providers differ- entially or reduce the administrative requirements for the top performers. Employers may also stop paying for the most significant “never events,” as specified by the National Quality Forum, such as surgery on the wrong body part and healthcare-acquired infections. Benefit Plan Design When medical evidence is available, it is incorporated into clinical practice through treatment guidelines, provider profiling, clinical decision support, and value purchasing efforts, such as centers of excellence and pay-for-performance initiatives. However, with the exception of clinical preventive services, it is still rare for sponsors to use benefit design to

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02 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE encourage and reward the provision of effective care and discourage the provision of ineffective care. Leading employers are using benefit design in a variety of ways, as described below. Employers may link coverage to the determination of effectiveness and the strength of the evidence. For example, there is strong evidence for many clinical preventive services, and many plan sponsors cover a schedule of preventive services at 100 percent and do not subject them to a deductible. Employers may link coverage to consumer behaviors that support evidence-based care. For example, they may reduce or eliminate copayments for maintenance medications when members participate in disease manage- ment programs. This approach is becoming known as a “value-based” pharmacy benefit. In another example, nonemergency back surgery is covered with 20 percent coinsurance when the following evidence-related criteria are met: the patient completes a medically supervised course of intensive • multidisciplinary treatment of not less than 8 weeks in duration; the patient notifies the plan of his or her intention to undergo sur- • gery and uses company-sponsored medical consultation or decision support services; and if the patient smokes, the patient completes a smoking cessation • program before spinal fusion is covered. Employers may link coverage to the use of providers identified as evidence-based performers. For example, employee cost sharing drops to 10 percent from the typical 80 percent-20 percent split when he or she chooses a physician recognized by one of the NCQA physician recognition programs. Employers may use coverage to promote evidence development through comparative research and observational studies; that is, they may require enrollment in a registry for coverage of new procedures or experimental treatments for which there is evidence of benefit but for which there is a lack of information about the long-term benefits and possible harms. Employers may offer health improvement programs with incentives to participate. For example, a survey of nearly 3,000 employers found that 53 percent offered a health risk questionnaire in 2006, and many used incentives to encourage participation (Mercer Health & Benefits Evolution and Revolution: Benefit Trends, 2007). Another employer survey found that 28 percent of employers offered premium differentials for participa- tion in health improvement programs in 2007, up from 16 percent in 2006 (National Business Group on Health/Watson Wyatt, 2007).

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0 EMPLOYERS AND EMPLOYEES TIER 1 TIER 2 TIER 3 Benefits tier is based on High Moderate Limited strength of scientific Coverage Coverage Coverage evidence of effectiveness. 80%- 100% 50%- 80% 0% - 50% Network selection is based on perfor mance. Flex benefit for meeting criteria, e.g., Employee cost - sharing par ticipation in care management, disease encourages use of high management, clinical trials or data registr y perfor mers. Discounts for in-network providers and Physicians, hospitals, and ser vices apply across tiers, e.g., networks are recognized consumers with 0% coverage benefit from for excellence receive the negotiated group rate payment. FIGURE 12-1 The National Business Group on Health Benefit Design model. SOURCE: The National Committee on Evidence-Based Benefit Design publication. The National Committee on Evidence-Based Benefit Design, established fig 11 by the National Business Group on Health, proposes a benefit design model that incorporates these approaches (Figure 12-1). Employee Decision Support Employers who have provided tools and resources to inform their members about treatment options and the relative benefits and risks of par- ticular options have demonstrated the improved use of evidence-based prac- tices among their employees. For example, one survey of large employers found that 44 percent offer employees access to health coaches, who use evidence-based guidelines when they inform patients about their care options (National Business Group on Health/Watson Wyatt, 2007). Employers may also provide their employees with educational materials about medical evidence related to specific procedures and treatments that encourage the employees to make informed decisions for healthier lifestyles. Employer segmenting of the plan population and targeting to each group education and resources on how to use medical evidence and evaluate treatment options can greatly improve their impact on decision making. Finally, employers can provide their employees tools and information to help them get the most value from their healthcare plan.

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0 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE Public Policy Advocacy Policy advocacy and development is also a key activity for employers and employees. Examples of current opportunities to shape public policy relevant to improving evidence development and application include initiatives to increase the funding or capacity for comparative effec- • tiveness research; encouraging public provider reporting of quality, outcomes, and • prices; supporting funding of research on consumers and how to most • effectively communicate information and engage patients in deci- sion making; and signing on to the U.S. Department of Health and Human Services’ • Value Driven Health Care Initiative, which is aimed at standard- izing and expanding healthcare information transparency at the local, state, and federal levels. U.S. Department of Health and Human Services’ Secretary Michael Leavitt has encouraged the nation’s private-sector employers to support four cornerstone prin- ciples for healthcare purchasing: use interoperable health informa- tion technology; measure and report healthcare quality; collect and report information on healthcare prices; and implement programs to encourage consumers to use high-quality, cost-effective services (e.g., pay-for-performance reimbursement). LEADERSHIP COMMITMENTS AND INITIATIVES Initiatives Representatives from the employer sector highlighted three initiatives that would be transformational in achieving a healthcare system rooted by medical evidence. Expand Evidence Base with Clinical Experience and Comparative Effectiveness Research To better support decision making about the best evidence, both in patient care and in provider coverage, the evidence base needs to be expanded significantly. Information and data capture at the point of care could supplement and refine the current knowledge. The broad application of healthcare information technology tools will be necessary to expand the evidence base with data generated from clinical experience, including data from electronic medical records, registries, and interoperable systems.

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0 EMPLOYERS AND EMPLOYEES Evidence-based practice supports will also aid success. An increased empha- sis on comparative effectiveness research to determine the effectiveness of various treatments (drugs, devices, surgery, etc.) for a particular condition is also needed to support decision making. Comparative effectiveness research should incorporate cost into effectiveness evaluations; • incorporate functionality, productivity, and other indirect costs in • evaluations; address current medical practice as well as new technologies; • identify the criteria against which the appropriateness of the inter- • vention can be determined; and identify health interventions with little or no value. • Use Evidence in Coverage and Payment Policies There will need to be an agreed-upon process or decision model for the translation of research into coverage and payment policy recommendations. Once recommendations are made, employers can design health benefits and write provider contracts consistent with those recommendations, reinforc- ing the expectation that evidence-based medicine is the standard and pricing and network steerage will be linked to the practice. Stimulate Broad Participation in Existing Evidence-Based Medicine Efforts Many leading employers are already involved in promising evidence- based medicine initiatives through group purchasing efforts and contracts with health plans. Employer groups have driven some of these initiatives, whereas clinicians, health plans, and delivery systems have initiated others. These efforts include the use of agreed-upon standards and measures in quality reporting and pay-for-performance initiatives and the use of health plan-pharmacy benefit plan utilization review and intervention with clini- cians and patients. Cross-Sector Collaboration: Creating Demand for Evidence-Based Medicine The single most important factor in successfully carrying out the initia- tives mentioned above is consumer demand for evidence-based medicine. Today’s consumers are largely unaware of the variability in healthcare quality and do not have adequate information with which to make informed healthcare decisions that are based on the evidence and that reflect their values and preferences.

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0 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE NEXT STEPS Next steps for expanding the evidence base with comparative effective- ness research include the funding of research and the achievement of agree- ment on research priorities. The steps necessary for expanding the evidence with clinical experience include the development of standardized clinical tools and practice supports. Next steps for using evidence in coverage and payment policies are to learn from existing efforts and to develop a transparent methodology for specifying coverage criteria. Next steps for creating consumer demand include the following: Communications research is needed to understand what messages • and information resonate with consumers. Research by a variety of stakeholders is already under way. One example, called Com- municating about Evidence-Based Health Care Decision Making, is a research project sponsored by the California HealthCare Founda- tion and conducted by the American Institutes for Research. New research efforts should build on what has already been learned. A marketing campaign would pique consumer interest in evidence- • based medicine and create demand for decision support informa- tion. The campaign should include actions that consumers can take to improve the quality of their health care. The Agency for Health- care Research and Quality-Ad Council campaign titled Questions Are the Answer is a good example of such an approach. Develop standardized transparency and reporting methods and • requirements. Develop simple, straightforward tools for healthcare consumers. • Target groups should include retirees, users of large amounts of health care, and individuals with limited English proficiency or health literacy. Tools should help consumers weigh the risks, ben- efits, and treatment options and explain the basis of the evidence behind coverage decisions. Finally, although employers have much to gain from a healthcare system grounded in evidence, the day-to-day responsibilities of benefit managers and human resources executives will keep them at arms length from the Institute of Medicine (IOM) Roundtable process. Some leading employers may participate directly, but most will continue to use their employer asso- ciations to represent them and their healthcare vendors to initiate practices deemed appropriate. The more closely that the IOM Roundtable uses initia- tives that employers are already engaged in to forward its agenda, the more likely it will be that employers will participate directly in IOM efforts.

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0 EMPLOYERS AND EMPLOYEES REFERENCES Asch, S. M., E. A. Kerr, J. Keesey, J. L. Adams, C. M. Setodji, S. Malik, and E. A. McGlynn. 2006. Who is at greatest risk for receiving poor-quality health care? New England Journal of Medicine 354(11):1147-1156. Care Focused Purchasing, Inc. 2007. Brochure 200. Claxton, G., J. Gabel, B. DiJulio, J. Pickreign, H. Whitmore, B. Finder, P. Jacobs, and S. Hawkins. 2007. Health benefits in 2007: Premium increases fall to an eight-year low, while offer rates and enrollment remain stable. Health Affairs 26(5):1407-1416. CMS (Centers for Medicare and Medicaid Services), Office of the Actuary. 2007. National health expenditures 200-20. Baltimore, MD. http://www.cms.hhs.gov/ NationalHealthExpendData/downloads/proj2006.pdf (accessed May 12, 2008). Darling, H. 2007. Controlling health care costs through empowerment and partnership, In- stitute on Health Care Costs and Solutions. Washington, DC: National Business Group on Health. http://www.businessgrouphealth.org (accessed June 1, 2007). Hewitt Health Value Initiative™. 2006. Annual Health Care Cost Increases. Lincolnshire, IL: Hewitt Associates, LLC. http://www.hewittassociates.com/_MetaBasicCMAssetCache_/ Assets/Press%20Release%20PDFs/2006/10-09-2006.pdf (accessed November 15, 2008). Institute of Medicine. 2000. To err is human: Building a safer health system. Washington, DC: National Academy Press. The Kaiser Family Foundation and Health Research and Educational Trust. 2006. Employer health benefits annual survey. Menlo Park, CA. The Leapfrog Group. 2007.  hospitals are designated Leapfrog top hospitals for 200. News release, September 18. Washington, DC. Mercer Health & Benefits Evolution and Revolution: Benefit Trends. 2007. Paper read at National Business Group on Health, April 18, 2007. Washington, DC: Mercer, LLC. National Business Group on Health/Watson Wyatt. 2007. Dashboard for Success: How Best Performers Do It. 2th annual National Business Group on Health/Watson Wyatt survey report. Washington, DC. National Committee on Evidence-based Benefit Design/National Business Group on Health. 2007. Evidence-based benefits: A toolkit for employers. http://www.businessgrouphealth. org/benefitstopics/et_evidencebasedbenefits.cfm (accessed November 15, 2008). Stanton, M. 2004. Employer-sponsored health insurance: Trends in cost and access. Research in action: Issue , No. 0-00. Rockville, MD: Agency for Healthcare Research and Quality.

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