Commentary: For California employers, it’s time to re-think traditional health insurance

For nearly two years, businesses across California have had to completely re-envision their business model in response to the COVID-19 pandemic. Whether it’s managing equipment and technology around remote work, implementing significant cost savings measures, or dealing with supply chain delays, business owners are evolving to survive. And one area California business owners have continued to struggle with is healthcare costs.

With healthcare premiums and prescription prices on the rise, today’s healthcare costs are skyrocketing. Most employers are faced with difficult decisions around absorbing higher costs that negatively impact their margins or passing along increases to their employees. And because there is a lack of transparency in how healthcare charges are established and what employers are actually paying for when they purchase PPO health plans, employees are left struggling to afford the higher premiums or making tough concessions around their family’s finances to pay their high deductibles.

And worse, patients covered by the same PPO plan are unknowingly paying widely different costs for the exact same healthcare service in the same city. A typical CT scan in Los Angeles can vary by thousands of dollars from hospital to hospital. In fact, one hospital in the area charges $3,009 for a CT scan and another charges up to $6,762. How is this possible? Hospitals and major “in-network” or PPO insurance providers each negotiate and establish different rates for their members, even when the service is identical and the hard cost of providing service itself doesn’t change. But how much should a CT scan cost? As a reference point, in Los Angeles, Medicare pays between $165 and $185 on average for the same procedure.

Employers can control the costs of almost everything when it comes to running their business, except their traditional healthcare plan – which happens to be the largest expense behind payroll. It’s because of this that many employers are embracing a more creative alternative to traditional PPO – a.k.a. “black-box”– insurance plans.

Businesses are saving millions through hospital partnerships and referenced based pricing (RBP). Built-in contracts with hospitals and providers help keep costs low, and under RBP, an employer (supported by a third party administrator) pays a set price for each healthcare service tied to Medicare or the reported cost of the procedure. This prevents price gouging and creates greater transparency and consistency for its members. In addition, RBP pays fair and profitable reimbursements to providers that are also fair to employers, and most importantly, fair to California employees and their families. These total health plan solutions offer significant savings for employers, that can, in turn, bring savings back into the hands of employees.

While significant, stabilizing the cost of healthcare services alone isn’t the complete solution needed by California business owners hoping to improve their margins while also looking out for the wellbeing of their employees. Providing a complete healthcare solution is multifaceted, from identifying top quality providers to helping guide employees through complicated diagnoses and providing them with price protection against inflated billing. The solution is combining the financial savings of reference-based pricing with seamless benefits administration and concierge healthcare customer service, all in one customizable healthcare offering.

Last year, a record of 47.4 million Americans voluntarily left their jobs in 2021 in what’s being dubbed as the “Great Resignation.” If more business owners got creative with their healthcare choices, they could reinvest savings from a total RBP solution into attracting and retaining talent. Keeping rising healthcare costs at bay allows business owners to pass along those cost-savings as employee perks, like free ride sharing, daycare assistance, tuition forgiveness, car leases, bonus premium months and months with no co-pays.

California is known for being the home to some of America’s most innovative businesses. Now it’s time to take the lead on challenging the healthcare status quo with more creative, savvy decisions that allow businesses and employees the opportunity to thrive through affordable and transparent healthcare solutions.

Robert Wolfkiel is Regional Vice President of Imagine360, a company that offers a total health plan solution for self-funded businesses in California.

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