Catalyst

Healthcare Innovation: An Expensive Landscape

Innovation in healthcare is happening, and it’s happening quickly. In addition to care-delivery advances, evolving payer models, and shifting funding arrangements, perhaps the single most important revolution impacting care and its associated economics relates to pharmaceuticals. Research and development appears to be focused — nearly exclusively — on low frequency, high cost therapies targeted to improve the quality of life for a small population segment with severe needs.

 

We are in the midst of a health affordability and primary care access crisis in the United States, which means it’s becoming increasingly more important for employers who sponsor health plans to take an active role in impact management and strategic planning, while tying employee health to business performance.  In 2018, more than $3.5 trillion was spent on healthcare across the country — representing nearly 18 percent of U.S. GDP and up 4 percent from 2017. We’re expected to see 6 percent growth in this channel every year over the next decade. 

 

The majority of our legacy focus, however, remains on restorative healthcare versus driving units of overall health — a culture rooted in physical, emotional and financial wellbeing.  Approximately 50 percent of medical costs are borne by just 5 percent of the population, on average, while 50 percent of that population drives only 3 percent of total costs. Yet — for many employers — optics into where health spend is concentrated is cloaked at worst, opaque at best. Traditionally, throughout the Commonwealth, employer health plans with less than 100 participants receive limited data concerning treatment costs, condition prevalence, settings of care and more.  It’s difficult to combat a problem and evolve when key performance indicators are veiled at the granular level. At PA Chamber Insurance, we’re helping our clients move away from that model.

 

Disrupting the Market by Recognizing Dependencies

Designing and purchasing employee health benefits has never been more challenging, or more important. No single strategy or complement of approaches will fit all employers. New insights into care delivery models, reimbursement strategies, consumer behaviors and social influences of health are offering novel methods to engage employees and the provider community while making benefit designs more effective.

 

Thought-leaders in this space are working diligently to:

  • Measure the impact of efforts to increase health care value and understand the efficacy of various cost-mitigation efforts
  • Define organizational value based on a detailed understanding of employee populations, local market conditions and strategy
  • Deploy insights from behavioral economics to improve employee/member health
  • Evolve away from transactional renewal management toward engineering long-term solutions

 

Understanding and addressing total health is a critical component of solutions that control costs and improve outcomes. Rooted in research commissioned by the Kaiser Family Foundation, 40 percent of a person’s health status is impacted by individual behaviors such as diet, exercise, stress management and care plan adherence; 30 percent by genomics and medical history; 20 percent by social and environmental factors such as home, family, economic stability and mental wellness; and the smallest segment — 10 percent — is attributable to clinical care.1 However, this is where we see the largest focus and highest concentration of spending.

In addition to conventional employee health impacts, the dynamics and demographics of our workforce are changing rapidly. A tangible skills gap exists as employers work to staff effectively — technical ability and leadership aptitude are perennial challenges. Low birth rates in the U.S. and many developed countries are reducing the labor pool, while simultaneous advancements in artificial intelligence are poised to disrupt convention. Alternative labor — contractors, freelance/gig, and crowd workers — are set to alter the traditional social contract between employer and employee, while becoming essential to business growth in the years ahead. According to Deloitte, by the end of next year the number of self-employed workers in the U.S. will triple to 42 million. Additionally, 45 percent of surveyed businesses are having trouble filling open positions (67 percent of those employers with more than 250 employees).2 Coupled with the fact that, in 2017, Millennials represented just one-third of the U.S. workforce and by 2025 they will constitute 75 percent of working adults, we must prepare to tailor our approach.3

 

When employers execute effectively, they work with advisory partners to view human capital risk holistically — recognizing that employee health, productivity and organizational performance are inextricably tethered together. Acquiring top talent, maintenance of the asset and retaining strong teams in a competitive market is paramount — all of which remain a core focus of effective employee benefit programs.

 

Fortune 100 companies have long understood employee health and engagement as an important production input. Whether a manufacturer, a financial services firm, a multinational energy company or a telecommunications giant, forward-thinking organizations leverage culture to create movements — not simply programs. But the lessons are just as valuable for companies of any size. 

 

Capitalizing on Synergy

At PCI, we find ourselves at an interdisciplinary intersection where public policy meets commerce. We’ve curated a leading-edge portfolio of employee benefits and human resource solutions — built to empower a healthy, productive and secure workforce — while delivering an enhanced opportunity for clients to attract and retain desirable talent. We’re excited to be incubating meaningful change with our client-partners to prepare for the challenges ahead, which is foundational to the PA Chamber’s mission. We’d welcome the chance to start a conversation with you.

 

 

Brian Orsinger, CEBS, GBDS, VBS is Chief Operating Officer for PCI.

 

1 Kaiser Family Foundation: “Beyond Health Care: The Role of Social Determinants in Promoting Health and Health Equity.” San Francisco, CA. May 10, 2019.

2 Deloitte Touche Tohmatsu Limited. 2019 Deloitte Global Human Capital Trends.  New York, NY. April 2019.

3 Gronbach, Kenneth W. (2017)  Upside: Profiting from the Profound Demographic Shifts Ahead.  New York, NY: AMACOM.

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Founded in 1916, the Pennsylvania Chamber of Business and Industry is the state's largest broad-based business association, with its membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of BusinessTM.