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Asking the tough questions. Why do plan sponsors offer health benefits plans? And are they achieving results?

February 8, 2016

As we’re sure you’ll recall (please humour us), intriguing facts about health benefits usage from GSC’s 2014 Health Study got us thinking and reflecting: what is the purpose of a health benefits plan? To help keep this question front and centre in 2016, we invited Sarah Beech, president at Accompass—an independent consulting firm that specializes in benefits, retirement, and compensation—to meet with us for a round-table discussion. Sarah joined Peter Gove, GSC’s innovation leader for health management and David Willows, GSC’s vice president, Strategic Market Solutions. Let’s listen in to what they had to say…

The sustainability of health benefits plans

DAVID: “First off, to establish a context, let’s talk about sustainability. The word sustainability is used a lot in our industry. Do you think sustainability of health benefits is a real issue?”

SARAH: “Like any business expense, health benefits are something every organization needs to constantly look at. So is the sky falling? Is every organization going to get rid of benefits? No, I don’t think so. If you look back in time there are lots of examples of when benefits were a larger expense than expected and companies probably questioned their value. Twenty years ago health and dental benefits were going up 15% every year, dental had double-digit expense growth, drugs were absolutely going up, hospital was the second biggest expense line, and paramedicals weren’t even on anyone’s radar. However, we somehow didn’t get rid of any coverage; we just seem to have kept adding things. “What’s different today is that there is a lot more media attention. Now with the advent of new high-cost drugs there is even more reporting. But by no means is this why sustainability is an issue—the main reason is chronic conditions and an aging population.”

PETER: “Yes, chronic conditions and the aging population are our biggest challenge. Although there are definitely things we need to do from a health benefits perspective to address this challenge, it’s questionable as to whether today’s plans are set up to tackle it. And then there is the connected issue of waste and using drugs efficiently as our studies continue to show that medication non-adherence is a big issue.”

DAVID: “Of course we couldn’t have a discussion about sustainability without talking about the new high-cost drugs. Do you see these as a different kind of wave coming or is it just the nature of business and we have low-inflation eras and high-inflation eras? Are you more concerned about the long-term drug trends than you were five or ten years ago?”

SARAH: “I’m not a physician and I don’t have a crystal ball, but I think new innovations in health, like cures, are something we should all be grateful for. The hepatitis C drugs that represent a cure and a one-time expense are worth it from both a quality of life perspective and in terms of the numbers. If you look at how Remicade®, Humira®, and Enbrel® have managed rheumatoid arthritis, it’s clearly been a good development. Where the discussion comes in is around whose continues... 3 responsibility it is for payment…plan sponsors?…plan members?…the government? And I don’t think government will take on more costs.”

PETER: “One of the difficulties in answering the payment questions is that we have trouble making connections between payments and outcomes because of our disjointed, multiple-payer system. For example, if we can cure hepatitis C, then the provincial health plans benefit by reducing the costs of transplants, etcetera. Even in our own industry we have trouble with connections between plan members taking a hepatitis C drug and their rate of absenteeism. There are great benefits associated with these expensive drugs that we are unable to capture in our data.”

DAVID: “So everyone agrees that despite the high costs, these drugs are amazing advancements. Then the question becomes: what is the responsibility of the carrier community as additional new high-cost drugs enter the market? What should we do that maybe we’re not doing now?”

PETER: “I think that benefit managers like GSC have what you could call an ‘educated consumer responsibility.’ In a sense we are buying health services for our clients so we need to really understand the value that these services do or do not provide and then ensure that our customers—plan sponsors—can make educated decisions on what to reimburse.”

SARAH: “Yes, there’s often a lot of noise in the industry about the expensive drugs, so creating the correct awareness about the medications is very important. By that I mean getting accurate information out early and even better if it can be targeted by demographics.

“I also think that plan sponsors would like to know the role of other parties regarding high-cost drugs. What drugs will the government pay for? Will the pharma companies share through patient assistance programs? Are there opportunities to leverage different payers?

“Also, in terms of plan design, it’s important to keep in mind that plan sponsors need the element of choice. No two plan sponsors, no matter how similar, necessarily want to treat things the same way. For most plan sponsors their benefits plan is really important, so they value choices and they don’t want to be told, they want to be educated.”

PETER: “I agree, we need to continue to develop creative alternatives for plan sponsors to ensure efficiency, such as new ways to enhance adherence and for using drugs efficiently. There is all kinds of research out there that we can build interventions on so that everything is informed by data.”

The purpose of a health benefits plan

DAVID: “Assessing the ‘real value’ of the new high-cost drugs brings us to the central question: what is the real purpose of a health benefits plan? So Peter, you’ve spent a lot of time researching the things we standardly reimburse as health benefits. Do you think the way plans are structured today makes sense?”

PETER: “Well to begin with, I have a problem with the term ‘health benefits.’ We throw a whole lot of stuff into the health benefits pot—some of which has nothing to do with health at all, at least in terms of the science. Some of the things bundled under the health benefits label are things that plan sponsors can do from a ‘compensation’ perspective. For example, there is very little evidence that massage is useful for the kinds of health challenges plan members are facing, especially chronic diseases. And it is essentially not covered in U.S. benefit plans. However, somehow massage has continues... 4 become a standard benefit in Canadian plans. I am not saying throw it out, but it may be helpful if we become more clear on what is a ‘health’ benefit versus what is ‘compensation.’ Plan sponsors need to attract employees, and something like massage may help, but that’s not about health or about lowering long-term costs.”

SARAH: “We also need to bring into the discussion what a ‘family’ looks like. There could also be the option of limiting dependent coverage. But overall, in terms of drugs, the plan’s focus should be on getting the right medication to the right person at the right time. In addition to prior authorization, we need to figure out other ways to make sure this happens.”

The role of paramedical services

DAVID: “In terms of what a health benefits plan is for, let’s bring into the discussion the rise of paramedical services. Many services that were originally considered ‘alternative’ have now become extraordinarily mainstream. What is your take on the rising spend for paramedicals?”

PETER: “As I’ve already touched on, I think maybe we got confused somewhere along the line where benefits plans now consider a number of paramedical services as actual health-maintaining, health-promoting, illness-curing interventions— but the problem is that there is no evidence they are. However, they are definitely things that people like to have.”

SARAH: “Building on Peter’s comment, it may also be that regarding certain paramedicals, a sense of entitlement has developed—the idea that I have the coverage, so I’m going to spend it. Of course services like physiotherapy may make all the difference in terms of regaining full mobility after an injury. But does everyone in a family need to get a massage each month? Maybe they feel they do, but maybe that’s not the employer’s responsibility. There are a number of health benefits calling for a ‘needs versus wants’ discussion.”

PETER: “Also, part of the problem may be that some of these providers are allowed to perform whatever services they want as long as they are a regulated health professional. Maybe we should look at other approaches like, instead of controlling paramedical costs just by maximums, we could control costs by restricting what procedures the paramedical practitioner can perform to only ones backed by the scientific evidence. It’s the whole notion of proof.”

DAVID: “But the issue gets pretty loaded for advisors and plan sponsors because many plan members honestly believe that they need certain paramedical services to keep healthy or to manage their health. How do we handle that?”

SARAH: “It really gets back to why a plan sponsor has a benefits plan. If the purpose is engagement and maintaining a competitive position, then they can offer all kinds of services but they must realize that there is a finite bucket for salaries and pension plans and health benefits plans. Another plan sponsor may feel that their plan’s purpose is to help keep plan members healthy, so some services that don’t address chronic conditions may have to go.”

PETER: “I agree, it all comes back to being really clear about the purpose of the benefits plan and what in it is adding value. The paramedical groups want us to consider their services as promoting health and preventing illness; however, for certain paramedical services, there is little evidence to support this. All these groups are competing for dollars so ultimately we need to sort out what adds value and from what perspective; some services might add value from a health perspective and others from an employee engagement perspective.”

Moving forward

DAVID: “In terms of plan sponsors, is there any momentum to answer the question about what is the purpose of their benefits plan? Any movement afoot to rethink the traditional plan? Also, perhaps there are some obvious things that plan sponsors could be doing to better manage their plan?”

SARAH: “For the most part, plan sponsors aren’t ready yet. Some clients would probably answer that their benefits plan is part of the overall employment experience—but they understand that it comes at a cost. Some smaller plan sponsors wanting to address affordability may look at caps, but it’s not at all a full-scale movement. Overall, plan sponsors want to take care of their plan members—we don’t hear clients saying they want to cut people off. “In terms of better managing their plans, plan sponsors need to address wastage, non-adherence, and disease management. At GSC, you’ve done various studies and there are many studies out there showing that patients with diseases who are taking multiple medications can be effectively managed and remain at work. To tackle the chronic disease issue, plan sponsors need to be part of the process in actively helping plan members manage their illnesses—it’s less expensive and provides a better quality of life.”

PETER: “I agree, the next big challenge for all of us is to help plan members manage their illnesses better; this will help tackle things like wastage as patients become more adherent. We definitely need to move in this direction with new ideas like behavioural economics concepts and ways to structure environments—things that are not typically viewed as related to health benefits but that will actually help maximize the value for the dollar.”

Rome wasn’t built in a day…but it was built

The round-table discussion hit home the point that to ensure the sustainability of benefit plans, change is coming, and we need to plant the seeds now. Plan sponsors need to make sure plan members understand why changes are necessary and be part of the discussion around trade-offs. Sarah sums it up well:

"The easy answer is to add caps or more cost sharing with plan members, but that’s not solving anything; that’s just shuffling money around. We need to change the paradigm by asking: why are we offering health benefits coverage and is it truly for the health and wellness and financial protection of plan members? If so, then we may end up looking at health benefits more like car and home insurance—the serious issues get fixed, but for the small things, plan members look after themselves. Employees are every organization’s biggest asset so they need to be part of the discussion. They need to understand that something has got to give—what’s it going to be?”