U.S. companies align to control health care costs

American Express, Verizon and 18 other companies hope to contain escalating costs for employee health care. Their newest allies: Each other.

A new not-for-profit called the Health Transformation Alliance (HTA) has corralled 20 large U.S. companies into an effort that could rebalance relationships between corporate America and the health supply chain.

“As individual companies, any company in the insurance marketplace can say ‘We’re not going to deal with you,’” said Tevi Troy, vice president for public policy in the new alliance. But “if you’re a big enough organization, then the pieces of the supply chain will take action.”

Executives have long considered benefits costs a top concern. They were the second-highest challenge for two quarters of 2015, according to the AICPA’s Business & Industry Economic Outlook.

Health insurance benefits made up about 8% of private-sector compensation in September, according to the Bureau of Labor Statistics. That figure has been stable over the last decade, but the actual costs have increased significantly: The average premium for workers with family coverage increased 61% from 2005 to 2015, according to a Kaiser Family Foundation survey.

The HTA says it will tackle “wasteful and inefficient” market practices, which it blames for rising employee premiums. The American Health Policy Institute, of which Troy is CEO, estimates that 53% of families may be paying “unaffordable” amounts—which the government defines as 9.5% of income—by 2025. About one-quarter meet that definition today.

The initial focus of the group will serve as a way to share best practices and data alike. Once the data are collected and analyzed, the companies can then better identify potential health issues within their employee bases and in turn identify opportunities for savings.

“We have about 4 million lives we’re talking about,” said Troy, who was a top health official under President George W. Bush. With information about those lives, “… you have better knowledge about what’s going on, including regional disparities and price disparities. If we see differentials, we can say, ‘Let’s address this problem.’ ”

Troy gave the example of pharmaceutical prices, noting that a prescription may cost $200 extra to fill in some parts of the country. A unified front could iron out some of those differences, he says. The HTA has published a memorandum on the legalities of “legitimate, efficiency-enhancing joint purchasing activity.”

Shared health data also could guide the companies in developing new programs for the health issues they see most frequently, such as high cholesterol in employees. The pooled data will be anonymous, the alliance says.

In a written release, the group also outlined plans to “break bad habits” that encourage patients and doctors to choose ineffective prescription drugs. The process could help educate more Americans about the health care system. A 2013 AICPA survey of 1,008 U.S. adults found that 51% could not accurately identify at least one of three common health insurance terms: premium, deductible, and copay.

The new group plans to launch a pilot project “to help employees obtain more affordable prescription medications” next year.

Efforts to reach insurance industry advocates were unsuccessful late Friday.

—Andrew Kenney is a JofA contributing editor.