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Reshaping Care Coverage: A Public Good Problem (05:57)

Given how great a share of companies’ spending is allocated toward health care, why aren’t employers more careful shoppers for this care? Why aren’t they demanding better service from insurers? “I don’t get it,” says Harvard health economist Leemore Dafny.

Part of the problem is that the companies most capable of having that argument are doing well, replies David Lansky, President and CEO of the Pacific Business Group on Health. These are global companies. Health care incremental spending is a small part of their total spend and is just not a priority for leadership to address. Additionally, attracting and retaining employees by offering comparable benefit designs and “choice” flexibility of where patients can go is an expectation for these companies.

“There’s a structural limitation that the companies perhaps most capable of leading this kind of transformation are the ones who least need to,” says Lansky. “The companies maybe in the middle of the economy who are most afflicted by the increases in cost and the other issues you described don’t have the bandwidth or resources. They’re very dependent on brokers and consultants — who have their own economic agenda — so that they’re not going to be leading the charge to transform the health care system and change the role of all these intermediaries for that middle part of the market.”

But there has been more progress in benefit structure and how much health care coverage an employee decides to have than one might be aware of, adds Bob Galvin, CEO for Equity Healthcare. “Employers are much more willing to work on benefit design than they are on delivery system interventions, and that’s an important distinction,” he says. “Where we all want to be is reshaping the delivery system. We’re getting there slowly, but really what’s happening is much more at the level of what kind of coverage do I want, what kind of insurance do I want.”

This is a classic public good problem, Dafny comments. The collective benefit exceeds the individual private benefit, so it doesn’t happen. The classic solution would be a collective effort on the part of the public sector to push toward particular delivery reform — which we have seen — or on the part of insurers getting together and saying, “We need it simple. We’re not going to get to value if we don’t implement reforms that employers are supportive of. Let’s do these things and collectively agree on certain kinds of standards for these collaborative arrangements.”

Cigna has employers that span both spectrums, notes Lynn Garbee, the payer’s Senior Director of Reimbursement and Collaborative Care. There are big national employers who aren’t focused on costs and who want to offer their employees choice. “A big, fat directory is what is really going to sell for their employees,” she says. But there are also cost-conscious employers who want the payer to restrict the network.

Cigna is pushing for a middle ground, however. To promote affordability for the big employers, they’re pointing out choice architecture in the big directory that would help nudge employees into the right choices. “That’s what we’re trying to promote, the idea that it doesn’t have to be one or the other,” says Garbee.

Equity Healthcare tells employers the design to adopt, that they should offer employees choice but choose as their index plan either a narrow network or more generous health care coverage with more choice — but the employee must pay the difference. “We’re hoping to get at both issues with that,” Galvin says. “If they’re cost conscious, they’re likely going to choose the index plan, which in some ways would either be a narrow network or a system that was focused on the kind of value that we’re interested in.”

Pacific is seeing many of its members do two features of this process, says Lansky. The first is a primary care emphasis that enables most employees to declare a PCP relationship as a trigger and then are favored with benefit design or other incentives. The second, particularly for large employers, is a move toward direct relationships with provider systems, called MACOs. When setting someone accountable for care coordination, total cost of care, and population outcomes, that relationship is important, and having a “narrow” network won’t work because it doesn’t satisfy the goal of primary care–led coordinated care.

“We [payers] would like to enable that,” says Garbee. “Instead of the employer having to go out and find their own ACO relationships, we want to be able to be a matchmaker between them.”

From the NEJM Catalyst event Navigating Payment Reform for Providers, Payers, and Pharma, held at Harvard Business School, November 2, 2017.

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