Why should employers care about health care payment reform? Because of a concern over the continuing rise in health care costs.

It’s really quite simple. Company business models cannot sustain increases in general and administrative expenses (which is where most employers pay for employee benefits) that exceed increases in other income streams. So how can we stop this ever increasing spiral of health care costs that are impacting both companies and their employees?

Realigning the Payment System

In my opinion, the primary strategy employers must embrace is to work at realigning the payment system. The current fee-for-service payment system primarily incentivizes more care, rather than appropriate care based on quality and safety. Fixing the payment system can actually result in limiting the cost increases AND drive quality improvements. This isn’t a novel idea. Employers have been talking about this for the last 10 years. Why does it seem so hard to fix this? And why aren’t more employers engaged in the solution?

Perhaps it’s because by fixing the payment model, there will be real and perceived winners and losers. So if employers don’t want to be the perceived loser or, worse, the real loser, then we need to make sure we play a part in defining the rules of the new game.

We Can’t Rely on the Carriers to Fix Our Health Care System

Right now, most of us use one or more health care companies (referred to hereafter as “carriers”) either as an insurer or as a third-party administrator (TPA) to manage our health care expenditures. For decades, we have chosen to “outsource” this work to the carriers because health care is not our primary business and we have very small staffs that can barely keep up with the ongoing increases in compliance issues related to administering benefit plans. So we’re waiting on the carriers to address our broken system. Shouldn’t their goals align with ours? We’re the customer, right? Well, actually, carriers have many stakeholders that they must consider:

  • Most are publicly traded and must consider their shareholders. The amount of money they make directly correlates to how much health care costs. The more it costs, the more they make from their customers…us.
  • Most consider their provider network to be a key competitive advantage. So by default they must consider the provider community a primary stakeholder they can’t ignore.
  • Many have a large volume of business with CMS/Medicare and must have systems and processes which support their largest payer.

It’s Up to Employers to Get Engaged to Fix Our Health Care System

Employers are the one payer group that relies on no other capital resource to pay for health care costs besides themselves. Congress has legislative authority to raise Medicare premiums or increase taxes. Insurance companies can simply raise their premiums. What can employers do? We can rearrange the payment system so that everyone cares whether the health care that is provided is appropriate, so that all parties are satisfied that they have had a fair business deal. And employers won’t be satisfied if we aren’t at the table determining what is suitable to us.

Here’s one other thing employers must understand. No one really knows what will or won’t work. And we won’t know until we try some things. We can’t wait until someone else does “it” and has a well-documented business case that can prove “it” works…because it may not. We need to be at the table with our best guess about what might work and then be willing to take a gamble, pilot a few ideas, and share outcomes.

So, here’s a suggestion for employers—get engaged in the dialogue and use your voice to influence how the massive checks your company writes to carriers will hold providers accountable. The Health Care Payment and Learning Action Network (LAN) was initiated by the Department of Health and Human Services to align stakeholders across sectors in moving payment from traditional fee-for-service (FFS) methods to FFS linked to quality and alternative payment models (APMs). “Private payers” does not just mean insurers, it also means employers.

I urge employers to become familiar with the payment categories and to review the many APM examples outlined by the LAN’s APM Framework and Progress Tracking Work Group in its APM Framework White Paper. Other LAN work groups are now developing recommendations for models that many purchasers are directly involved in, including population-based payments, joint replacements, and other APMs. I urge you to join this affiliated community, know what recommendations are being developed, and ensure your voice is heard in the process. More importantly, I urge you to consider what you can do to move your organization to smarter, value-based purchasing of health care. Don’t just sit back and wait for what comes out in the end, because as noted motivational speaker Tony Robbins has said…, “If you do what you’ve always done, you’ll get what you’ve always gotten.”

Please note that guest blogs from Guiding Committee and Work Group members represent the views of the individual authors and do not represent official positions of the Guiding Committee, Work Groups, CAMH, or CMS.


  • […] a powerful legacy. In addition to this program and some other innovative initiatives, she’s spread lessons learned throughout the employer community. She worked with Pacific Business Group on Health, for […]

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    Extraordinary blog, Sally. There are numerous routes for managers to join the push for esteem installment right now– e.g., getting included with the LAN, lining up with SIM multi-payer activities, interfacing with similarly invested bosses and boss coalitions doing esteem based contracting. Walmart has done the greater part of the above! Much obliged for getting the message out and “strolling the discussion.”


  • Educating employers and shining a spotlight on hidden ways TPA’s are fleecing employers as evidenced in one of many recent lawsuits filed against TPA’s such as the “Hi-Lex controls Inc. v Blue Cross Blue Shield of Michigan” case would be helpful.

  • Health insurers are not the only group with motives not conducive to value or results based payment reform. Employer motives for being in the health insurance game are competition and tax incentives. And they don’t have to do anything revolutionary to keep getting what they want. A tweak here and there keeps them competitive with each other. They best thing employers can do to move us towards a results based payment model is to get out of the business of providing health insurance.

  • I got very excited reading this post and thinking “here is someone who gets it!”

    I couldn’t agree more with her statements on moving away from carriers and it’s up to employers.

    However, upon looking at the Guiding Committee, it’s chock full of the status quo carriers and providers that got us into this mess and have no incentive to change it! What’s the youngest person on this committee? Maybe 45???

    Furthermore, upon reading the White Paper, it’s nothing more than the standard industry-insider gobbledygook! I had trouble understanding it and I’m someone that knows more than the average Joe about healthcare.

    Employers aren’t going to understand any of this, which will result in them just sticking with the status quo.

    • Health Care Payment Learning & Action Network

      Thank you for being engaged. We understand that different stakeholder groups will find value in a tailored translation of the APM Framework White Paper for their world. We agree that employers in particular may be less familiar with the topic than other groups. We are working on strategies for targeted outreach and communications with employers.

  • Bill Donahue

    An important call to action. WalMart must experience this phenomenon: Employees working in rural areas where there is only 1 or 2 healthcare systems to serve their needs. In those circumstances, insurers actually have very little leverage to incentivize providers to move away from FFS reimbursement models. Employers in those areas, however, can potentially impact “monopoly” providers by adding their voice and their input at the negotiating table.

  • Sally, thanks so much for sharing the view from where you sit. It’s been great to learn from all of the experimentation that Walmart has done. You are absolutely right. We don’t yet know the ideal solutions. But the only way we will get there is by trying new things and evaluating the results. CPR is glad to be lending our technical expertise to the development of metrics to track the nation’s progress with payment reform against the framework created by the HCPLAN. We have to start by understanding what payment methods are in use and then we can try to draw correlations between the methods and the impact on quality, efficiency and costs.

  • An excellent perspective. It is time for action.

  • George Karahalis

    I was beginning to wonder if we would be pushing out the reform concepts (White Paper) and beginning to sell (arm twist, push, whatever) the same concepts to employers and other self-funded organizations. In my opinion, these reforms must reach every corner where incentives and disincentives have an opportunity to change our trajectory. Looking at stock market performance for the last several week (and especially today), I would think that self-funded employers would get activated very, very quickly. We might be headed for an ugly 2016 in the world economy.

    That said, my concern is that the employers will protect themselves and their profits at the expense of sick employees by going to plan designs that truncate their involvement, just as an employee begins an episode of chronic disease or some dread disease. Perhaps the principles of the White Paper need to become a part of ERISA.

  • Great blog, Sally. There are many ways for employers to join the push for value-payment right now–e.g., getting involved with the LAN, aligning with SIM multi-payer initiatives, connecting with like-minded employers and employer coalitions doing value-based contracting. Walmart has done all of the above! Thanks for spreading the word and “walking the talk.”

  • This is a great call to action for the purchaser community. We have an opportunity to drive real improvement in the health care system, which will improve quality and reduce costs for employees and their families.

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