Employers move to pay providers based on greater value

ARLINGTON, Va., Oct. 04, 2016 -- A growing number of employers seeking to achieve better health outcomes for employees at a lower cost are implementing value-based reimbursement and payment arrangements with their health insurers and medical service providers, according to the 21st Annual Best Practices in Health Care Employer Survey by Willis Towers Watson (NASDAQ:WLTW). The survey also found that more employers are embracing plan design features that encourage employees to use higher-quality, more efficient and lower-cost services.

“As employers grapple with how to lower the cost of health care without lowering quality, they are increasingly looking to pay medical service providers for health outcomes instead of the services they provide,” said Trevis Parson, chief actuary, Health and Benefits, Willis Towers Watson. “Today, these strategies are more common in geographies where employers have large concentrations of employees or where cost-efficient providers are available and willing to engage in emerging reimbursement models. But this is just the start of a much larger transition — a move from a health care delivery system based on fees for services to a more patient-centric system based on fees for value or outcomes.”

According to the survey, a growing number of employers plan to adopt the following value-based plan strategies in the coming years.

Establish centers of excellence (COEs) for specialty services with health plans, separate providers or third-party vendors. Today, 45% of employers are giving employees access to COEs for specialty services such as back, knee, cardiac and infertility issues. This is up from 37% of employers who provided access to COEs in 2015. Another 32% are planning to do so by 2018. The vast majority of employers that have established COEs (97%) did so working with their health plans. While just 17% of employers reduce employee cost sharing at a COE today, that could triple to 54% by 2018.

Implement high-performance networks. Today 20% of employers offer networks of high-quality, cost-effective medical service providers that agree to provide care for a specific population at lower cost. The use of high-performance networks is up from 11% in 2015, with another 39% potentially adding them over the next three years. Of employers that offer such networks, about 50% reduce employee cost sharing for care within the network; that number is expected to increase along with the expansion of such networks over the next two years.

Contract directly with service providers to secure improved pricing. While few employers are contracting directly with service providers today, nearly 16% of employers are currently considering this approach. Among the service providers they identified as potentials for direct contracting are COEs, accountable care organizations and patient-centered medical homes.

“The greatest challenges are not only getting employees to use value-based services but also to find health care plans and providers that can deliver them,” said Sarah Oliver, health care delivery leader, Health and Benefits, Willis Towers Watson. “To make progress, employers can use a combination of communication, decision support and incentives to make sure employees understand what they are and encourage their use. We expect employee usage to expand in lockstep as soon as these arrangements become commonplace.”

According to the survey, the plan design features expected to grow in usage include:

• Reducing point-of-care costs for the use of high-value services. 11% of employers do this today, but the number could reach 47% by 2018.
  
  
• Increasing point-of-care costs for the use of commonly overused services. 9% do so today, but the number could grow to 41% by 2018.
  
  
• Requiring employees who get certain types of medical procedures to pay a higher cost share if they do not get a second opinion. 4% do so today, but the number could reach 31% by 2018.

About the survey

The Annual Willis Towers Watson Best Practices in Health Care Employer Survey was completed by 600 U.S. employers between June and July 2016 and reflects respondents’ 2016 health program decisions and strategies and, in some cases, their 2017 and 2018 plans. Respondents collectively employ 12.2 million full-time employees and operate in all major industry sectors.

About Willis Towers Watson

Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

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