The majority of Americans get healthcare through their employer, which means benefits leaders carry a lot of weight as the makers of decisions that directly impact employees and their families. Lantern CEO John Zutter recently joined Benefits Executive Matt Harmon and Second Opinion host Christina Farr for a podcast episode on some of the challenges keeping benefits leaders up at night these days.
A few key takeaways:
- Increasingly complex treatments are leading to a rise in ultra-expensive, million-dollar+ claims.
- Many small employers struggle to cover these expensive specialty care treatments.
- High labor turnover continues to impact the efficacy of long-term health investments.
Costs Continue to Rise
With the rising rates of cancer, the growing prevalence of GLP-1s and new cell and gene therapies, employers are seeing more costly claims than ever.
“Yet employers are still on the hook to maintain high-quality healthcare because the talent market is still really hot,” Farr said. “You don’t want to lose some of your great people to another company, so you provide really fantastic health insurance and a full suite of benefits.”
This requires employers to dig into the trends and find where the majority of their healthcare spend is concentrated in order to implement solutions that help bend the cost curve.
“Specialty care happens to be the epicenter of most of that, with respect to cell and gene therapies, infusions, cancer treatments and large surgeries,” Zutter said.
Small Employers Struggle to Keep Up
“A million-dollar claim used to be considered a super high-cost claim,” Harmon said. “Maybe it was a NICU baby, maybe it was a particular specialty surgery related to brain cancer. Maybe it was an event that went bad that had to be rectified. Now it’s quite common where you could see a million-dollar claim, and for smaller employees, that could really break the bank.”
While new treatments for chronic and genetic conditions offer hope in their ability to substantially reduce symptoms and improve quality of life, their price tag can be overwhelming for employers. These high costs are a significant factor in whether employers choose to be self-funded versus fully insured. Whereas the threshold for self-funding used to be at about 1,000 employees or less, Zutter noted it’s trending closer to 300 now.
“For smaller employers, the solution might require switching to fully insured models where costs get spread across a bigger population or collaboratives where they can share the risk with other employers,” Zutter said. “And then for large employers who are on the bleeding edge, it’s about putting in place very specific and customized solutions, like a Center of Excellence.”
High Turnover Impacts Efficacy of Long-term Health Investments
Employees are switching jobs at a quicker pace than in years past. That means it’s harder for employers to see the long-term impact on employee health of providing coverage for high-cost prescriptions like GLP-1s.
“What we’ve seen as a substantial trend over the last number of years though, is in narrow lanes of healthcare, the higher-cost things, the higher-risk things — whether that’s surgery, infusions, cell and gene therapies or GLP-1s — is employers saying, ‘We’re going to cover it, but you’re going to have to go to certain places that are going to meet a quality standard, outcome standard and cost affordability standard.’ And so we’ve seen an increasing rise in that,” Zutter said.
Healthcare spend is extremely concentrated. Around 1% of members tend to account for about a third of the costs.
“When you have that hyper-concentration, the employer can choose very narrow swim lanes and say, ‘For certain large musculoskeletal procedures, we’re going to require you to use this panel of providers that meet a high-quality, cost and affordability standard. For GLP-1s, we’re going to require you to go through this process that’s focused on quality, affordability and access,’” Zutter said. “You can deploy some of those strategies while not creating as much noise for the broader population.”
