Employers hold the key to health care cost reductions

Man showing business graph on wood table

The hoopla surrounding the new Amazon/Berkshire Hathaway/JPMorgan Chase alliance makes it seem like large employers are finally getting mad about the high cost of health care. But employers have been mad about such costs for decades.

Margot Sanger-Katz, in the New York Times, points out that corporations have been experimenting with cost-reduction strategies as far back as the 1970s, when wellness programs were first introduced. The problem isn’t that corporations aren’t trying; it’s that most of their efforts have been unsuccessful.

Some corporations have been forces for innovation

But not all. The Health Transformation Alliance, a consortium of 41 corporations including American Express, Macy’s, Verizon and Coca-Cola just negotiated a prescription drug price contract that they expect will save $600 million over the next three years.

Tackling prescription drug prices is probably the low-hanging fruit in any cost-reduction strategy. To help determine which efforts to tackle next, the alliance is sharing data on employee health trends. CEO Robert Andrews explains:

[I]f data tell us that 50 percent of patients who visit a particular hospital suffer a relapse for a particular medical condition while only 25 percent of patients who visit a crosstown hospital have a relapse for the same illness, we want our employees to know that.

The alliance’s shared data also show that four procedures account for 20 percent of treatment expenditures: knee replacement, hip replacement, back pain and diabetes. Later this year, experiments in three cities will begin with the goal of delivering better results at better prices for these four ailments.

Employers should be more aggressive in reducing costs

We’ve blogged previously about Safeway and the State of California’s success in bringing down employee health care costs with reference pricing. So success is possible if corporations have the will to be more aggressive.

Employee Benefit News has good advice for self-insured companies wishing to do more about bringing down employee heath costs. EBN’s advice points out why employers hold the key to future health care cost reductions: they have captive audiences.

Not only are employees captive, but they are eager for help. I believe employees are quite willing to follow their employers’ lead in seeking out the best care at more affordable prices. It requires only for employers to make this a corporate goal.

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