What businesses don’t know about making healthcare affordable.

Nearly half of our state’s population is covered by employer-sponsored health insurance. That’s more than 3 million Arizonans.

With more and more Arizonans looking to their employers to help them manage their health, they feel the mounting pressure – because the landscape is changing.

Years ago, employers rated access and customer service as the top health benefit concerns. Employers wanted to ensure their team could get the care they deserved, when and where they needed it. While that remains a top priority, we’ve seen a shift. Employers now rank escalating health insurance costs as their number one benefits concern. In fact, 72% of Chief Financial Officers report that the cost of health benefits is a significant concern, versus other operating expenses.

Healthcare Spending

Healthcare spending in the U.S. is rapidly on the rise. To put this in perspective, nearly 1 out of every 5 dollars spent in the U.S. goes toward healthcare, with hospital and physician services making up half of the total spend.

Blue Cross Blue Shield of Arizona (AZ Blue) recently conducted a statewide survey. Most Arizonans recognize that the cost of medical care is the underlying driver of premium costs. At AZ Blue, 85 cents out of every premium dollar goes to providers for medical care delivered.

What is Driving Healthcare Costs?

Healthcare costs are expected to grow at the highest rate in a decade, projected to be 8% for 2025. In addition to inflationary pressure, there are a few key drivers of this near-record trend.

Rising Cost of Medications: Gene and cell therapies are a boon to quality of life. Did you know that we now have a cure for sickle cell anemia and hemophilia? These types of new therapies are extraordinary, but expensive, developments. The cost of the cell and gene therapy to cure sickle cell anemia, for example, is $2.64 million.

Another incredible breakthrough is Semaglutides for diabetes and weight loss. At a cost of about $1,000.00 per patient per month, Semaglutides, like Ozempic and Wegovy, now make up 4-5% of all claims and add $23 per member to monthly premium costs. This expense was almost unmeasurable a few years ago. Medication expenses have a ripple effect on the entire healthcare system and impact overall costs.

Behavioral Health: As more people seek help for behavioral health conditions – a positive trend reflecting greater awareness and reduced stigma – costs have inevitably risen. Increased demand for services and the return to in-person care after the pandemic have brought the estimated cost per person per month for behavioral health services from $10 in 2020 to $19 in 2023, a 90% increase.

Aging Population and Rising Disease Burden: As we live longer, we experience more costly chronic conditions. In 2020 there were 72 million people over 50 years of age with chronic conditions. That number is expected to reach 143M by 2050.

Technology and More Care: Medical trend is up across the country, in part due to people addressing health needs postponed during the pandemic. Medical cost escalation is also driven by life-changing medical advancements. We can now treat conditions that we just had to endure decades ago. For example, more than 700,000 total knee replacements are performed annually in the U.S., and it is estimated that by 2030, the number of total knee replacements performed will increase by more than 600% compared to 2005.

Health Solutions

With rising costs, a physician shortage in our state (partly due to a population boom and the lack of medical training programs), and ever-evolving health needs, employers are looking for help. Here are some places to look.

Integration and Alignment:

A fundamental flaw in our medical system today is the lack of alignment between providers and insurers. This can be partly addressed through value-based arrangements in which a provider is compensated for outcomes – not just the number of visits or services provided. A step even further is the merging of insurance and medical care. Prosano Health Solutions is a good example of a medical care and insurance union. Prosano brings insurance, advanced primary care, behavioral health, and lab services together under one roof. This can save employer groups and their employees money on healthcare costs by eliminating administrative redundancy and managing end-to-end medical care more effectively.

How? Let me give you an example.

Recently, a patient at Prosano Advanced Primary Care was struggling to pay out of pocket for a necessary procedure that they needed to receive regularly.

The procedure, administered monthly by a hematologist at a hospital, costs about $500 per treatment. That worked out to $400 per month that insurance covered, and $100 per month coinsurance for the member.

The Prosano physician recognized an opportunity to save money and make it easier for the patient. They found that they could deliver the same service by acquiring about $10 worth of supplies. The Prosano team coordinated with the hematologist and now delivers the service through Prosano for $0 to the patient.

Accounting for labor costs and supplies, healthcare cost savings were $450 every month. Imagine if we can do that hundreds or even thousands of times.

This kind of proactive and coordinated care has significantly impacted overall utilization and cost for members. Our latest data shows that emergency room visits for Prosano members decreased by more than 14%, inpatient admits decreased by 12%, and specialist visits decreased by 15%, resulting in a total medical care cost reduction of 13.6% compared to the prior year.

Wellness and Health Management Programs:

Proactively identifying serious health conditions can not only save lives, but also reduce costs. While wellness programs can help, it has been difficult to establish a solid ROI. One very tangible thing that can be done is encouraging an annual physical.

Additionally, fully leveraging your insurance carrier’s Health and Care Management capabilities is critical. Health and Care Management teams can work with employer groups to provide preventive service engagement like on-site health screenings and condition management programs that empower members to take control of their health through education, resources, and support. Our Care Management and Health Management programs, for example, provide extra support for members with conditions that can be difficult to manage. And we support health in all life stages, from reproductive and youth health to adulthood and healthy aging. For example, our High-Risk Maternity Care Management Program engages moms identified as high-risk to ensure they are connected to the right care and have all the resources, education, and information they need.

Lastly, Lifestyle Accounts encourage and support a healthy lifestyle by reimbursing employees a set amount (we provide $500 a year) for eligible well-being-related activities, such as fitness activities, family support, financial planning, education, and much more. This is a solution to a multi-pronged problem. It not only encourages healthy lifestyles, but it personalizes benefits. Employees can use the funds on what is important to them—a huge satisfaction driver!

Performance Networks:

AZ Blue offers one of the broadest networks in the nation, with 95% of physicians and 96% of hospitals in-network. Our networks typically deliver over 10% savings compared to industry-leading PPOs. Even more savings can be achieved by narrowing networks to the most efficient providers. While this does create less choice, this type of program can typically reduce premiums by 10%.

Discounted Medications:

Good RX or the AZ Blue Price Edge program can provide significant savings on prescription medications, helping members reduce out-of-pocket costs. The estimated annual savings for AZ Blue members is over $3 million for covered generic products.

Safeguarding Costs:

One of the most important things an insurance company can do is to safeguard against fraud and waste, ensuring that members and employers are not overcharged. Make sure your insurance company has a robust program in this space. Our team’s efforts saved more than $40 million in 2023.

Expanding Access to Behavioral Health Services:

While adding providers may seem counterintuitive to saving on costs, this is an exception. behavioral health issues, left untreated, are very costly to a company – not only in terms of related medical costs, but losses to productivity. AZ Blue has made it a priority to add more mental health providers to our network who serve areas where greater access is needed. We recently added nearly 2,000 providers to our network to help combat shortages.

Where do we go from here?

Healthcare is extremely complex and expensive. But it is an essential part of our lives and, here in Arizona, we are blessed to have access to top-notch medical care.

There are exciting developments on the horizon that will not only improve quality of life, but hopefully start bending the healthcare cost curve. These tools include artificial intelligence, digital tools, and new life-saving drugs. But we will have to continue to be diligent in managing costs so access does not become a problem.

AZ Blue will continue to partner with providers and communities to bring smart solutions to the table for employers and all Arizonans.

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