BenefitsPro: Spend Money to Save Money – How Incentive Programs & Transparency Tools Lower Health Care Costs
Cash-back programs have long been popular with credit card, airline and retail companies who have seen great benefit from offering these incentives to encourage customers to use their services. Given their success, it’s not surprising that we’re seeing the cash-back approach enter an entirely new market – the complex health benefits industry.
As health care costs have steadily increased, employers expect that their employees act like consumers when it comes to health care decisions. Under consumer directed or high deductible health plans, there is the notion that employees will feel compelled to shop around for care because they are responsible for paying for their own expenses until the (high) deductible is met. However, this is not often the case.
The challenge is that employees, while expected to act like consumers, are not savvy shoppers when it comes to their health care options. Most people are unaware that the price of any given medical procedure, product or service can vary widely within the same geographic area – even within the same network. As a result – to draw an analogy from the retail space – they are all too often shopping for tube socks at Saks Fifth Avenue when they could get the same product, at a much lower cost, at the Target down the street.
Even when employees are aware of price differences, most have no idea how to research those differences or assess quality differences. Nor do they have the time to do so.
Employees see and seek the savings:
To address this need, employers are increasingly offering transparency services to their employees – and sweetening the deal by offering incentives. With transparency services, employees (and their dependents) can request a personalized report of their options for elective tests and procedures. Reports include costs and quality ratings and are based on the individual’s health plan, geographic area, provider preferences and specific procedure. By demonstrating to employees – in hard dollars and cents – how their health care choices affect their financial (as well as physical) well-being, they will make informed decisions that impact the cost and quality of their care.
DirectPath research has found that 82 percent of employees who compare costs choose a lower cost provider, saving an average of $400 per cost and quality service request.
For employees in high deductible plans who haven’t yet met their deductible, the savings mean less money out-of-pocket, out of their health savings or health reimbursement accounts. For those who have met their deductible, they help lower overall costs for the employer.
For employees who need a more immediate, concrete reason to shop around, incentive programs can help immensely. Such incentive programs offer employees a percentage of the savings (typically 10 to 20 percent, capped at $1,000) when they choose lower cost providers based on their cost and quality report results.
Over time, employees begin to see the value of routinely comparing costs for their elective services, as well as for other things like prescriptions and medical supplies.
Employers are also increasingly offering employees access to health care advocates, who help answer benefit questions, clarify out-of-pocket costs, help with referrals and authorization and research in-network physicians and facilities.
Employers reap and rave the benefits:
Of course, when employees save, so do employers. Employers will see an immediate reduction in their spend and improved member experience ratings. While some employers may hesitate over the upfront cost of transparency services (typically per person per month), the service pays for itself in a matter of months. A manufacturing company with 5,000 employees saw requests for nearly 300 transparency reports in just six months. In that time, their employees saved $88,200 and the employer $326,781. DirectPath research found employers with rewards programs receive an annual average of 290 percent return on their investment.
When employees are tasked with being true health care consumers, it’s important that their employers provide them with the support, programs and tools to make the most informed decisions. When incentive and cash back programs are introduced, employees become even more motivated to make decisions that save them money – and employers are seeing significant returns on their investments.
Read the article here.