In the ever-evolving landscape of healthcare, one thing remains constant – the rising cost of health insurance. Forecasts predict the largest increase in health insurance costs in a decade in 2024 – a staggering 5.4% to 8.5% hike. So, it is now more important than ever for employers to manage their healthcare costs. And with the persisting tight labor market, it is critical for employers to lower their healthcare spend without passing costs on to their employees. Steering is one effective strategy in this pursuit.
What is steering?
Steering, also known as steerage, is a benefit design strategy that encourages plan participants to utilize specific healthcare providers, locations, and systems over others. The primary objective is to guide consumers towards preferred-value healthcare options. Ultimately, this leads to cost savings for both employees and the health plan. Essentially, steering involves motivating employees to seek care from providers offering quality services at more affordable prices. While employees remain free to seek care wherever they are most comfortable, steering incentivizes employees to use providers that save themselves, their families, and their employers money.
Steering can be integrated into the benefit plan design and/or introduced as an additional incentive outside of the benefit design.
Tiered networks are one example of steering. With tiered networks, employers can designate certain health systems, hospitals, or providers as preferable through the benefit plan design. Tiers can range from best value to greatest choice. They can include care administered in various settings, including hospitals, health systems, standalone facilities, virtual platforms, or even in-home settings.
Generally, Tier 0 or Tier 1 options come with no or lower costs to plan participants, encouraging their utilization. Offering healthcare with $0 copays for selected providers is an effective motivator for patients to utilize specific providers. This incentive urges enrollees to play an active role in their health by encouraging the use of preferred-value providers for preventive care and shoppable procedures. Again, with tiering, employees are encouraged to utilize preferred-value providers, but they have the option to see other providers based on specialty and need.
Employers looking to manage their healthcare spend effectively through a tiered network can take advantage of The Alliance’s Premier Networks – the Premier Network Emerald and the Premier Network Ruby. These customizable network options empower employers to maximize their plan savings by guiding employees toward preferred-value providers while still offering a broad range of choice.
The Alliance also rewards providers who offer good service at affordable prices by steering more patients to them. This is a win-win for providers of high-value healthcare, their patients, and their employers.
In addition to tiering, incentives can be used to motivate plan participants to choose specific health systems, hospitals, or providers. These incentives typically involve providing monetary rewards to plan members for selecting preferred-value providers. Incentive programs are often implemented externally to the benefit plan and can take more thoughtful effort to implement.
Why is steering important?
Steering allows self-funded employers and their employees to save money and enables employees to take care of themselves and their families. By guiding employees toward healthcare providers that offer quality care at lower costs, employers can achieve significant cost savings while ensuring that their workforce has access to the best possible medical treatment.
When employers reduce their healthcare spend, they can reinvest the savings into their workforce through enhanced benefits and higher wages. This gives employers a competitive edge in attracting and retaining top talent and ultimately enhances workforce health and productivity.
Where to Start?
To effectively implement steering and enjoy its benefits, employers need access to their data and guidance to understand it. This is where our Smarter HealthSM analysis can help. This powerful tool empowers employers by providing healthcare analytics that offer data-driven insights, which, in turn, drive significant savings.
Smarter Health is a tailored healthcare analytics report provided to The Alliance’s employer-members. The Alliance works closely with its employer-members to help them understand their data. When employers identify where healthcare dollars are being spent, they can pinpoint opportunities for cost savings without compromising the quality of care. For example, emergency room visits cost more than a visit to an urgent care or primary care physician. If an employer finds their employees are using the emergency room when they could go to urgent care or a primary care physician, the employer can encourage them to use these other resources, which cost less and are often more effective for their health concerns.
In 2022, employer-members who used steerage to guide their employees to high-value care realized substantial savings. Excluding the top 5% of high-cost claims, these employers saved more than 20% per member per month (PMPM) compared to those who did not.
As the healthcare landscape continues to evolve, steering emerges as a powerful tool for employers to navigate cost challenges effectively. Using steering, employers can not only manage their healthcare costs but also enhance access to care for their workforce.
To learn how steering can help you reduce healthcare spend and provide better benefits, reach out to our Business Development team.