How Benefit Design Reduces Health Care Costs

In early 2015, a group of health care professionals met for a panel discussion on health plan benefit design and controlling health care costs for consumers and companies. Though the presentation pertained to the Kitsap County area, the lessons learned extend all across Washington state. Lending their expertise to the conversation were David Schultz, market president for the CHI Franciscan Health peninsula region; Jim Page, an executive with Group Health (now Kaiser Permanente; Jay Burghart, CEO of The Doctors Clinic; Jennifer Kreidler-Moss, MD and CEO for Peninsula Community Health Services, and George Berni, MD and medical director for Harrison Health Partners.

Emergency room visits rising under ACA

The passage of Affordable Care Act (ACA) has had a domino effect on local health care. Dr. Kriedler-Moss pointed out that their uninsured rate in 2012 was 57 percent. In 2014 it was only 8 percent because the Affordable Care Act allowed more people to obtain insurance and, by extension, health care.

However, many patients have been going directly to emergency departments for care, which is much more expensive than other avenues. Franciscan’s Schultz provided supporting statistics. “St. Anthony’s emergency room visits have grown 22 percent over the last 15 months. Harrison’s have grown 10 percent. So as people have gained access to insurance coverage, their first point of access, unfortunately, has—at least for this community—been the emergency department,” Schultz said.

Reducing health care costs via benefit design

While it’s been said countless times before, smoking also impacts the cost of health care. Thoracic surgeon Dr. Berni, said, “Eighty percent of what I operated on is related to cigarette smoking. That’s a huge number.” Kaiser’s Page added that prescription drugs contribute to rising health care costs, with pharmacy costs accounting for a staggering 25 percent of total health care costs.

The key to keeping costs low while still providing quality care requires a combination of preventive care, effective tobacco cessation programs, and educating employees about generic drugs and when—and when not—to go to the ER.

One of the ways Kaiser Permanente encourages people to regularly see their doctor is by offering health plans with free preventive care visits. To help employees stop using tobacco, Kaiser Permanente partners with Quit For Life® Program, one of the most successful tobacco cessation programs in the country.

According to the FDA, generic drugs can cost up to 85 percent less than their brand-name counterparts while being just as effective. Many Kaiser Permanente plans for large employers offer tiered prescription benefits with lower copays for generic drugs and even lower copays for drugs used to manage common chronic conditions. And our mail order option provides more savings by typically allowing three refills for the price of two.

How Kaiser Permanente lowered ER use

We’ve found several strategies work for moving employees to use the right care channel at the right time. First, we work with employers to provide education about life-threatening issues appropriate for the emergency room. For less serious matters, there are urgent care centers. Kaiser Permanente operates five of them in the Puget Sound area—and there are additional options in our plan networks.

There’s also the 24/7 Consulting Nurse helpline for phone consultations and online visits for diagnoses, even prescriptions. Each is far less expensive than a visit to the ER. According to Carefirst, care from urgent or convenience care centers resulted in savings between 74 and 94 percent when compared to treatment at an emergency room.

In addition to education and encouragement to try other care channels, we’ve worked with employers to design benefits with higher cost shares for ER to discourage inappropriate use. These efforts have proven to be successful. After three years of working with a group of home health care workers, ER visits were reduced by 36 percent compared to the group’s experience with a prior carrier.


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All plans offered and underwritten by Kaiser Foundation Health Plan of Washington or Kaiser Foundation Health Plan of Washington Options, Inc.