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Medical Plan Design and Administration

Why Employers Care

Health care costs continue to grow. In 2013, national health expenditures totaled16.4% of the gross domestic product and the U.S. spent an average of $8,713 per individual.1

Distressingly, about 30% of total spending is wasteful according to the Institute of Medicine report Best Care at Lower Cost. Overuse and unnecessary choice of higher cost services total $210 billion; mistakes, care fragmentation and inefficiencies total $130 billion; and missed prevention opportunities cost $55 billion. We spend another $370 billion on excess administrative costs, prices that are too high, and fraud.2

What Can Employers Do?

The National Business Group on Health/Towers Watson Survey on Purchasing Value in Health Care, The New Health Care Imperative: Driving Performance, Connecting to Value found that consistent performing companies had a median three-year health trend of 1.6% compared to 5.2% for all respondents.3 Top-performing companies are more likely than others to use a strategy encompassing these elements:

  1. Differentiate cost sharing for use of high-performance networks (35%)
  2. Offer telemedicine for professional consultations (29%)
  3. Full replacement CDHPs (24%)
  4. Reward or penalize based on biometric outcomes other than smoker/tobacco-use status (23%)
  5. Use value-based benefit designs in pharmacy plan (21%)

Specific plan design tactics to manage costs, engage employees, and improve care quality noted by employers in the annual National Business Group on Health Plan Design survey, Large Employers' 2016 Health Plan Design Survey, include:

  • Offering consumer-directed health plans. Eighty-three percent will offer a CDHP with an uptick in those moving to full replacement (33%) in 2016.
  • Offering price transparency tools. Most (71%) now provide online price transparency tools to their employees either through their health plans or a third party vendor.
  • Actively pursuing an accountable care organization (ACO) strategy (20%).
  • Aggressively managing specialty pharmacy benefits through prior authorization,step therapy and quantity limits.



References (show references)

1 Organisation for Economic Co-operation and Development. OECD Health Statistics 2015. http://www.oecd.org/unitedstates/Country-Note-UNITED%20STATES-OECD-Health-Statistics-2015.pdf. Accessed July 24, 2015

2 Institute of Medicine.Best Care at Lower Cost: The Path to Continuously Learning Health Care in America. 2012. http://www.iom.edu/Reports/2012/Best-Care-at-Lower-Cost-The-Path-to-Continuously-Learning-Health-Care-in-America.aspx. Accessed September 12, 2012.

3Towers Watson and National Business Group on Health. 19th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care. http://www.businessgrouphealth.org/pub/d35ccf12-782b-cb6e-2763-b10f0c1c646f. March 2014.

Page last updated: July 28, 2015

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