Healthcare costs continue to go up for employers at the same time that their workforce is demanding better benefits. With those competing priorities, what are organizations to do?
Many are considering a departure from the traditional health plan model and pursuing direct contracting. Direct contracting is where employers — usually self-funded ones — turn directly to provider organizations to comprise their health plan provider network wholly or partially.
According to a new HR Dive survey conducted with Brighton Health Plan Solutions, LLC roughly 75% of employers have already leaned into that trend, with another 41% saying they likely will consider it by 2025.
The survey asked 150 benefits leaders about their awareness, perceptions, and intentions for direct contracts—and we’re excited to share those results in a free, downloadable report that captures the key takeaways, including this top one: It’s a favorable market for direct contracts, assuming provider organizations, such as integrated health systems, go about it the right way.
Here’s what we found:
1. Employers are engaging with—and finding value in—direct provider contracts, with plans for much more.
There’s a strong market for direct contracting according to these findings, says Michelle Zettergren, chief sales and marketing officer for Brighton Health Plan Solutions.
“These results are somewhat surprising and certainly suggest a wider interest in direct contracting than previously understood by the market,” noted Michelle Zettergren, chief sales and marketing officer for Brighton Health Plan Solutions, in the report.
That wider interest isn’t necessarily a carte blanche indicator that employers will accept any direct contract, however. Employers still expect those contracts to deliver better benefits and cost than a traditional health plan, a dual priority that addresses organizations’ current challenges in driving profitability while competing for talent.
2. Businesses are familiar with direct contracts, but they want to learn more.
The majority of leaders surveyed said they were familiar with direct contracting, but 4 in 10 people said they were extremely interested in learning more.
That represents a big opportunity for provider organizations to ramp up their marketing message and outreach—something they’re not currently doing enough of, the report showed. Just 39% of respondents said health systems and provider groups had discussed direct contracting with them.
Provider organizations should take heed of this gap and consider how they can engage employers on this topic. In particular, the findings point to new opportunities for integrated health systems, primary care networks and other provider organizations looking to capitalize on employer interest in direct plans.
3. Employers Want Cost Reduction, Shared Savings and Easy Implementation
When asked how much cost savings they’d expect to see with a direct contracting relationship compared to a traditional health plan, most people said 6 to 20%. They also reported interest in shared savings models when evaluating provider relationships, along with incentives, shared risk and quality metrics.
“Employers want to save on their current costs, and they're open to partnering with provider organizations who can offer shared savings arrangements,” Zettergren said in the report. “To generate savings for employers in both the short- and long-term, provider organizations should assess their unit costs and explore what medical management programs they may need to implement.”
Other factors employers considered important when pursuing these contracts included multiyear arrangements, provider reputation, specialists, HCAHPS scores, geographic representation, the ease of implementation, managing new solutions/vendors and communicating change to employees.
Another expectation employers may have is the type of provider organization they’re inclined to partner with — which is often with primary care networks and integrated health systems.
“This study shows that multi-site integrated health systems with primary care networks should explore direct contracting if they haven't already,” Zettergren said. “And if they are new to direct contracting, a third-party administrator like Brighton will help them first address their primary care gaps to enhance their competitiveness in the employer market.”
What don’t you see among employer expectations? “Previous experience with direct contracting,” something just 36% of leaders considered extremely important.
So don’t let inexperience stop you: Healthcare systems can take their organization direct to self-funded employers with the expert support of a TPA like Brighton Health Plan Solutions, which specializes in direct contracting.