Are you considering adding an ACO plan?

Employers are warming up to Accountable Care Organizations (ACOs), but is that the right option for your employees? There are already great resources on how ACOs work [i] – and I am not going to recount these details for you here. Instead, I want to help you determine if these types of plans might be a good fit for your employees.

ACOs are a product of the Affordable Care Act (ACA), but they are not completely unfamiliar territory for those of us who have been around a while. HMOs have a rather negative connotation to many of us who were enrolled in them 20-ish years ago, but they are very much an older and less tech savvy model of the ACO. If an ACO is streaming music from the cloud, and HMO is a cassette tape. They may sound alike, but they are fundamentally different.

Service Area Issues

A few important aspects of these plans have changed. Like HMOs, ACOs are specific to a particular service area, as they have to have a hospital network to succeed. So, to the extent possible, you will need to have a carrier knit together your ACO offerings if you have multiple locations, or have a benefits administration system that is smart enough to know who is eligible for which plan (and also reassign eligibility should an employee move service areas).

Cost Savings

The older HMOs relied on restrictions to care to drive costs savings. This added more administrative hassle (to both members and providers) and potentially to inappropriate restrictions for patients whose doctors were not good at documenting their case for the necessity of the care.

As the pendulum swung from the old model of restriction to a newer one of freedom, the new way to help control costs was to make the member foot the first part of the bill to a greater extent than they had to do in years – hence, the birth of the high deductible health plan (HDHP), or consumer driven health plan (CDHP).

Many employers added HDHPs/CDHPs over the last few years – we were looking for any way to help mitigate the rising medical plan trend. The main problem with this approach is that consumers really don’t have any easy ways to understand health care costs, much less become a smart consumer. 

Yes, we were all surprised when we went to the pharmacy in January and had a $300 fee, but that did not necessarily help us become better consumers. Many of us just grumbled under our breath and paid the bill – especially if our employer help us with some seed money in our HSA/HRA (or other savings) accounts.

But what about all of those great consumer tools? Even the best built tools and resources only help for some situations – I am probably not going to search for the lowest cost emergency room when I think I am having a heart attack. Nor do I necessarily understand why one place might charge more than another – maybe the more expensive provider is better quality? How are we to know, when health care quality is not well defined by anyone, much less your employees?

Accountability

For an ACO to work correctly, the accountability shifts from the member in the HDHP back to the provider, but with the technology to make the process (hopefully) much smoother. That sounds great, right? Doctors can help me navigate the system, their nurses will call and check on me when I forget to refill my diabetes medication, and they will help me navigate the complex health care systems.

However, we’ve just spent the last few years telling members that they had to be accountable!? No wonder employees are always confused. It’s like we’ve just told them butter is better than margarine, after years of pushing margarine. We give up!

That said, many of your members may really like the concept of having more savvy advocates for their health care – especially if they have a chronic condition or if most of their providers are already in the narrower network. Since I am a visual person, here’s how I like to think about how ACOs fit on the spectrum:

ACO Graphic

So, where do your employees want to fall on that spectrum?

  • Are they constantly confused about their plan and what is/is not covered? If so, they should move to the left.
  • In control and only asking very detailed questions? Maybe they can venture more to the right.

Savings

Will an ACO save your employer money? I am not sure we really know the answer to that yet. We do know thahave these plans do tend to attract the health (when priced at a lower price point) or those who already frequent the network. More time will help us determine if there are really savings to be had by pushing responsibilities back to providers. Unfortunately, the patient also needs to take accountability, including diet, exercise and medication adherence, Somehow, we can’t figure out how to create a plan that holds everyone accountable. I don’t think PPOs do that well, either.

Network Size

The other factor on this, of course, if the network size – ACOs typically have a significantly smaller network than most PPOs and HDHPs on the market. Let’s hope that some of that changes over time, as ACOs grow their network and integrate providers into their systems. 

For now, that’s another confusing factor in all of this – especially when many providers do not turn someone away when they show up and they are not in the member’s plan. Some even use non-network status this as a strategy and submit excessive bills to employer plans to exploit loopholes in non-network provider coverage. The usual and customary rates they receive are greater than the network price, so they waive any member fees and go after the insurance company with appeals and even lawsuits.

That’s exactly why some more provider accountability sounds so good to me right now, and I think (at least for now) ACOs are an option worth considering for many employers. Even if savings are unknown, increased member satisfaction with a more guided model may be the,right fit for your population, or even for you.

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[i] See the following resources:

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