Steps employers can take to solve health plan inequities

At a time of heightened awareness of the inequality plaguing the country, there’s no denying that it’s spilled into the design of employer-provided health plans. I detailed seemingly countless examples of that earlier this week, in part one of an examination of inequity in healthcare. As benefit advisers, we face both a business and moral imperative to do better for our clients and the employee populations we serve. Today, my focus is on spotlighting the myriad of solutions to this growing problem.

Fully insured plans with low out-of-pocket (OOP) costs might seem like the remedy for solving healthcare inequities that often affect the lowest income employees. However, they are rarely affordable and thus not offered, or the member is asked to pay too much for coverage, which is self-defeating. Moreover, the social determinants of health (SDOH) that lead to poor outcomes and high costs are exacerbated by bad health plan design.

But employers can still turn the tide. While self-funded health plans have many more options, fully insured plans can consider several meaningful changes. For example, they can decrease contributions for lower-income employees and offer a plan option with lower OOP costs with employee contributions subsidized to be affordable.

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Self-funded health plans have a much greater opportunity to address the needs of employees. Direct contracting, reference-based pricing, direct primary care and other concepts promoted by Health Rosetta and similar players promise great cost savings that can allow the plan to minimize employee contributions, including coverage for dependents. They can develop bundles of care (surgical, lab, maternity) that have discounted fees with no OOP costs for plan members at a higher quality of care.

There’s also more leeway with respect to managing their pharmacy benefits spend. Self-insured employers can make certain drugs, such as insulin, available at no cost for all, or just certain income groups.

Many of these options are focused on significantly bringing down the cost of healthcare to the plan, and that can have a dramatic impact on healthcare outcomes — but it is not a magic bullet. Reasonable access to healthcare providers, health literacy training and other solutions for SDOH problems are still needed.

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So what should an employer do to start?

Whether fully insured or self-funded, it is possible to create a Healthcare Social Equity Audit. It starts with a look at how much income cohorts are at financial risk for a large claim. For each employee, take the plan selected by that employee, add the in-network deductible and OOP limit, and then divide that sum by that person’s annual income. After that is done for all employees, a graph can be created of the different cohorts.

The goal is to show how much financial risk the most at-risk employees are carrying. They may be deferring or skipping care due to their high OOP cost. If the lowest income members are at risk for almost 20% of their annual income for just one large claim, how does the employer’s expense for the insurance really make sense? In comparison, the highest-paid employees probably have far less financial risk — and it is those higher-paid employees that typically decide what the deductibles and OOP limits should be for the lower paid members.

That portion of the audit should be coupled with a review of where employees reside. Do they live in 90210, the lap of luxury in Beverly Hills, or do they live in food deserts? The Economic Innovation Group has a calculator that economically categorizes each ZIP code from 1-100. With that, it is possible to segment each employee into economic zones based on home address. While imperfect, this can help employers identify which employees might live in distressed areas.

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From there, what about dependents? Some employers may feel dependents are not their concern — certainly the employees would not agree with that. An audit should look to see how many lower paid employees are able to cover their dependents compared to highest paid employees. It will be clear that the high cost of coverage for dependents in most employer health plans is a steep barrier for most lower income employees. The result is often dependents going uncovered or under-insured.

While employers can use these kinds of tests to get a micro-level look at how employees engage with healthcare and start to find small steps toward improvement, there are many organizations and individuals analyzing this challenge on a macro-level, including think tanks, governmental entities and professional organizations.

One example is the American Academy of Actuaries and its Health Equity Working Group. They are exploring ways in which better outcomes may be provided to demographic groups that are deemed disadvantaged. The organization is in the early stages of analyzing how the current health insurance delivery system does or does not work for historically disadvantaged populations. They’re starting with the existing healthcare delivery structure and traditional plan designs, though it is expected that they will, in later reports, make recommendations similar to those above.

Read more: To solve inequity in healthcare, we must first understand it

As we see at the macro-level, these issues are largely societal in nature, and many employers might think that they have nothing to do with them. That won’t be good enough moving forward. The stakes are that high. The above is just getting started. There is still much to do.