Employers are the largest purchasers of healthcare services in the United States and for providers, they are a financially important customer.  Employers provide health benefits to over 153 million people and pay 73% ($17,393) of the cost associated with the annual family premium. That’s 1 in 2 Americans who receive health coverage through their employer, and 3 out 4 – or about 108 million of us – receive health care coverage through a self-funded health plan.  

For health systems, employer sponsored health benefits are approximately 31% of their overall payor mix but its reimbursement represents a 63% contribution to margin.  As compared to Medicare or Medicaid, employer reimbursement is the financial fuel that drives operations and profitability.

The hitch in the giddy-up with employer sponsored health coverage is the number of hands in the reimbursement pie.  The supply chain of firms selling, processing, administering, preapproving, adjudicating, denying and paying claims is impressive.  While Eisenhower warned us of the buildup off the military industrial complex, one can easily make a similar analogy for the buildup of the claims processing industry.  And its impact is considerable.

For example, healthcare providers spent almost $20 billion in 2022 chasing delayed and denied claims and over half of these denied claims were eventually paid.  This means that providers spent over $10.6 billion chasing claims that were finally reimbursed, a complete waste of time, resources, and money.  In total, approximately 15% of claims submitted to private payors are initially denied and 3.2% of these denied claims had been preapproved through the payor’s prior authorization process.

It is estimated that 26% of the cost of healthcare in the US is for the “administration” of care ushered in by insurance carriers, brokers, benefit consultants, TPAs, ASOs, PBMs and the like.  Do they play an important role?  Yes, benefits must be sold, and bills must be paid.  But, can it be more efficient?  Yes, again.  In St. Louis, BJC has successfully launched a provider-sponsored health plan that has proven to lower cost for the employer without jeopardizing access to BJC’s industry leading quality of care.  The proof is in the year-over-year savings achieved by enrolled employers and the annual health plan renewal rate of 100%. Unnecessary pre authorization delays and denials have been removed. Standards of care are being met across populations. Hidden incentives have been extracted from pricing. Patients are happier, and employers are absorbing savings based upon a more efficient care delivery model. The news is spreading and so is plan enrollment.

There is no magic in understanding the inefficiencies in our industry.  But it does take vision and intestinal fortitude to carve a path forward.  The good news is the employer is at the table and is ready to participate.  How will you respond to this customer who is the most financially important purchaser of your services?