Managing healthcare costs can be a slippery slope for employers.
With healthcare costs rising, employers are increasing their use of utilization management (UM), an umbrella term for cost containment techniques that control patients’ access to healthcare services. But with that could come a downside: When cost becomes the primary driver of benefit design, employees may face a range of unintended consequences that can rebound on their employer as well—in the form of lower productivity at work, increased absences, worsening employee health, higher medical costs down the road, and more.
At a time when employees are seeking greener pastures, health benefits can be essential retention and recruitment tools, if they are designed to deliver value to the employee and not merely focus on cost-saving measures.
According to the Kaiser Family Foundation 2021 Employer Health Benefits Survey, the average annual premium for employer-sponsored family coverage increased 47% over the last 10 years to $22,221 in 2021 from $15,073 a decade earlier. Given these increases, employers must ask how they can provide health insurance that is both high quality and cost-effective. It’s the $690.5 billion dollar question—the amount spent by employers on health benefits in 2020.
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The answer, unfortunately, isn’t straightforward. Benefit plans designed around “cost-saving” UM practices may look good on paper but often come at a high price to employees and their employers.
At its best, UM helps to weed out unproven treatments, evaluate physicians’ recommendations, and reduce costs while delivering quality care. At its worst, UM creates administrative snarls, delays, stress, and costly out-of-pocket expenses for patients, and it interferes with patient/physician decisions regarding the best course of treatment for an individual patient.
On the surface, UM may appear to be an attractive element of a health plan—particularly since insurance companies claim it saves money and results in better patient care. Unfortunately, many employers are unaware that it can hurt outcomes for employees facing cancer and other serious conditions.
Here are three things you need to know about utilization management:
- UM can create obstacles to time-sensitive care. Common UM practices can be significant obstacles to time-sensitive, precise critical care. They put a tremendous burden on patients that can lead to worse outcomes, debilitating suffering, higher medical expenses, extreme financial pressures, relationship difficulties, lower productivity at work, increased absences, and dissatisfaction that can affect retention.
- UM may restrict access to lifesaving medicines. Ideally, the goal of employer-provided health coverage is to ensure swift and effective treatment for employees, resolve symptoms and prevent poor outcomes. From a business standpoint, “swift and effective treatment” is likely to mean less time away from the job and a timely return to productive work. However, this is not possible when a restrictive drug plan prevents access to needed medications—either those that can save a life or those that can support a higher quality of life—or creates a financial burden for employees due to high out-of-pocket costs.
- They may cause medication abandonment. UM practices that increase out-of-pocket costs or otherwise impose obstacles to care may lead patients to abandon their treatment, which can lead to worsening health and higher medical costs down the road. One example is pre-authorization, a utilization management tactic that requires certain services and treatments to be approved before a patient can access them. While most prescription drugs with these requirements get approved by insurers, the process can lead to long delays and worse: Studies show that more than a third of these prescriptions are abandoned at the pharmacy.
There is a rising focus on health benefits and patient-centered care as employers strive to retain and recruit the best talent in a tight job market. Nearly half (48%) of the more than 9,600 U.S. employees surveyed recently by Willis Towers Watson said healthcare benefits were an important reason they chose their current employer.
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Patient-centered health benefits can help an employer differentiate itself and remain competitive as it seeks ways to address recruitment and retention challenges. The evidence is clear that common utilization management practices can negatively impact patients, particularly those with serious and chronic conditions like cancer and diabetes.
When it’s time to reevaluate your employee benefits plan design, keep in mind that benefits are key to employee retention and recruitment. Place a high priority on eliminating delays to care, lowering out-of-pocket costs for employees, and streamlining or eliminating any burdensome UM processes currently in place. A quality health benefits package can support productivity, help reduce long-term medical spending, attract and retain talented employees, and build satisfaction and loyalty by demonstrating that the company values its most valuable resource—its employees.
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