For two decades, provider networks have often been important–even critical–for chiropractors to stay in business. Created as a way of controlling costs through limiting access to a ‘captive’ group of providers who agreed to a set of controls, networks could keep one provider in business and put one across the street out of business. In the last twenty years, what has changed? The most significant difference today is the fact that what we call ‘insurance’ doesn’t insure us like it used to, but for many people just provides access to a discounted provider price list. Different people read the tea leaves differently, but it’s more and more apparent that the economics of maintaining provider networks don’t make sense. How will health plans and employers respond? How will doctors of chiropractic react?
Let’s look at five trends in health care and consider their implications.
- Health care costs keep rising. In 2014, average employer-sponsored health benefits for a family of four cost a whopping $23,215. Employers covered 58% of the costs ($13,520); employees contributed 42% ($9,695) and paid another average of $2,487 out of pocket (OOP). For our average family, that’s more than $1K/month. Eighty per cent of covered workers had average deductibles of $1,217, and the percentage of those with deductibles of at least $1,000 reached four in ten–double what it was in 2009.
- Employers are passing along most of the increases. Overall, premiums increased 69% from 2004-2014, but worker contributions to premiums increased 81% in the same period. At the same time, employers’ profits literally have never been higher (9.3% of GDP after taxes), and they’ve settled into practices that are limiting what they will absorb in benefits expenses, passing along much or most of the increasing premium costs to employees. For employees, this is a compounding problem, as employee wages at 53.2% of GDP haven’t been this low since 1945.
- Defined benefit contribution plans give employers more certainty. Over the years employees have demanded benefits that cover more and more services, but these demands have effectively reduced their pay. Defined benefit strategies essentially put employees on an allowance and let them make choices from a wider range of options. In 2013, one large consulting firm (Aon Hewitt) helped its clients move to defined contribution plans, and 42% of employees purchased less expensive plans.
- High deductible health plans are increasingly in use. In 2014, almost half of US employers had high-deductible health plans available for their employees, and about one quarter of employees used them. This percentage is likely to go up, because in 2018 another feature of the Affordable Care Act kicks in, charging employers a whopping 40% excise tax on so-called ‘Cadillac’ plans–those which cost more than $10K for individuals or $27,500 for a family. Aon Hewitt also found that the percentage of those choosing high deductible plans rose from 12%-39%, while enrollment in preferred provider organizations dropped from 70% to 47%.
- Public and private exchanges are being used to shop for benefits. A recent survey found that 58% of employers had confidence in private exchanges. In 2014, 3.4 million people chose plans through HealthCare.gov and 600,000 chose plans through state-based exchange platforms.
So what are the implications of these, and what are the effects on doctors of chiropractic likely to be–and their prospective patients?
With costs going up, employers passing along most of the increases, defined contribution plans giving employers greater certainty, high-deductible plans increasing in use and online exchanges being used to shop for benefits, it’s hard to argue that plan-based provider networks will continue to be an important channel for patients. The costs of managing provider networks are substantial for plans. Because historically patients had no way to find providers without going through network directories, plans could serve as a ‘choke point’ for access, making both patients and providers dependent on the health plan, but that’s changing.
With the increasing amount, type and organization of information on the Internet and the trend of public and private exchanges becoming the shopping platforms used by health care consumers who have an allowance for purchasing benefits, the value of plan-based managed networks has to decrease. When you factor in the new dynamic of providers now competing with each other on price and amenities, the marketplace has essentially removed the discount pricing advantage plan-based networks offer.
So what’s a chiropractor to do? Understand that, for many if not most, agreeing to network terms is going to have limited value, and for a limited time. Understand that these are not ‘benefits’ in the classic sense: they are discounted services, and the discounts can be matched by anyone who wants to, if given the opportunity. When a consumer/patient considers a provider in a network that pays a DC $28 fee on a $60 list-price office visit, and their out of network provider agrees to accept the same compensation, the benefit of that plan discount goes away. And because more providers are accepting what insurance pays for a limited service number and move their patients into cash-based wellness or concierge service models, the ‘management’ of those services is also rendered unimportant.
The bottom line for many health care providers is that we must start thinking more and more like retailers. For some, that’s a tremendous opportunity; for others, it’ll be a tremendous burden. But for health care consumers and for the profession, it’s also a chance to change the way we talk to our customers, define and advertise our services and value, and to re-conceive our place in the health care ecosystem.
Some sources of the data above:
Berwick, DM Hackbarth, AD Eliminating Waste in US Health Care JAMA. 2012;307(14):1513-1516
http://www.hhs.gov/news/press/2014pres/12/20141230a.html (accessed 4/2/15)
https://www.businessgrouphealth.org/pressroom/pressRelease.cfm?ID=234 (accessed 4/2/15)
http://kff.org/report-section/ehbs-2014-summary-of-findings/ (accessed 4/2/15)
http://www.commonwealthfund.org/~/media/files/publications/fund-report/2005/apr/how-high-is-too-high–implications-of-high-deductible-health-plans/816_davis_how_high_is_too_high_impl_hdhps-pdf.pdf (accessed 4/2/15)