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How Employers Cooperate to Control Health Care Costs
By Melina Kambitsi, Ph.D., senior vice president, business development and strategic marketing, The Alliance

Harvard Business Review recently gave employers strong advice for changing the trend of their health benefit spending.

“To Control Health Care Costs, U.S. Employers Should Form Purchasing Alliances,” advised the headline in the Nov. 2, 2018 issue. The article by David Blumenthal, Lovisa Gustafson and Shawn Bishop stated that employers “will have to band together in purchasing coalitions that give them the local market power” needed to address “the true underlying causes of rising health care expenditures: high prices and health care inefficiencies.”

We’ve heard similar advice from speakers at Alliance events aimed at employers who self-fund their health benefits. For example, Sally Welborn, a consultant who was previously the senior vice president of global benefits for Walmart Stores Inc. told employers at the Annual Seminar in May 2018 that Walmart’s size gives it the market heft to try out some new approaches to get better health care value.

Small employers can gain the same power to change local health care markets by banding together, Welborn said.

When they do, they typically find that organizing as an alliance, coalition and/or cooperative creates an effective business structure for their joint efforts.

The Alliance Example
The Alliance is an example of how employers can come together to change health care. Originally named the Employer Health Care Cooperative Alliance, The Alliance was formed in 1990 by seven Madison-area employers who wanted greater negotiating power with local health care providers. Organizing as a cooperative let participating employers share both the responsibility and the benefits of membership.

Today more than 240 member-employers in Wisconsin, Illinois and Iowa rely on The Alliance to provide the network and resources needed to self-fund their health benefits. Together, Alliance members spend $780 million every year on health care for the 90,000 people enrolled in their health plans.

By pooling their health care purchasing power, members of The Alliance can contract directly with doctors and hospitals to get lower prices and pursue a higher level of care. This allows employers to reach out to local providers to discuss their needs and reshape local health care relationships in ways that move health care forward.

Moving Health Care Forward

Employers’ efforts to move health care forward take many different forms. Here are a few examples:
  • Negotiating “bundles“ to pay for elective surgeries. A “bundle” covers multiple elements of care for a single price that is known in advance. That allows employers and employees alike to compare providers and pick the option that is right for them.
  • Guiding consumers to high-quality care. The Alliance’s QualityPath® program guides employees and family members to hospitals and clinics who meet national quality measures and set a bundled price that offers savings on joint replacements, CTs, MRIs and colonoscopies.
  • Developing new approaches to primary care. Most patients start their care at a primary care office for internal medicine, family medicine or pediatrics. Some employers in The Alliance are lowering their long-term costs by investing in primary-care clinics at or near their workplaces. These clinics reduce unnecessary specialty care and improve patient outcomes through more time with providers, rather than more care.
Working Together

Other coalitions also help Midwestern employers tap into health care expertise, offer educational resources and increase their ability to move health care forward.

For example, on behalf of its member-employers, The Alliance is a member of:
  • The Midwest Business Group on Health (MBGH), which has 125 members who provide health benefits to more than 4 million people and spends more than $4.5 billion annually on health care benefits.
  • The National Alliance of Healthcare Purchaser Coalitions, which represents business purchaser coalitions nationwide that together serve 12,000 health care purchasers and 45 million Americans.
  • The American Benefits Council, which is an advocate for employers on employee benefit issues, including health care. Its 440 members include large employers as well as organizations that provide services to employers’ benefit programs.
A Smarter Way to Do Business

So why do health care cooperatives and coalitions attract so many businesses? It’s because a cooperative approach helps employers negotiate for health care in a way that makes providers pay attention.

As the Harvard Business Review article noted, “To achieve the kind of gains in controlling health care costs that employers want, they will have to get bigger and smarter in the future.” Health care cooperatives and coalitions help them do both.
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