We spoke with the woman behind GM's plan to shake up the healthcare system
- Employers like GM are starting to question the role health insurers play in the healthcare they provide for their employees.
- GM is a self-insured employer, which means that it foots the bill for the healthcare its employees use. Starting in 2019, the company will offer its salaried employees in Southeast Michigan a plan that works directly with Henry Ford Health System, cutting out much of the role insurers typically play in setting up health plans.
- The move is part of GM's US healthcare leader Sheila Savageau's strategy to get healthcare plans for the carmaker's employees that are more tailored to their specific needs.
Large employers are starting to put healthcare middlemen on notice.
That includes one of the largest carmakers in the world. In 2019, General Motors will offer its salaried employees in Southeast Michigan a plan that works directly with Henry Ford Health System, covering about 24,000 employees and their families.
It's a different arrangement for the carmaker. Instead of using a health insurer, GM negotiated the terms of its plan with the hospital system directly, an agreement dubbed a "direct-to-employer" contract.
For many Americans, their employers are the ones picking up the tab. More than half of the non-elderly population is covered by an employer-sponsored plan, and almost 80% of large companies are self-insured. As healthcare costs go up, employers are the ones feeling the pressure. And some are starting to get fed up.
GM's US healthcare leader Sheila Savageau's approach: strike up more direct relationships with the products and services GM's employees are using, rather than relying on other companies like health insurers or pharmacy benefit managers - which are responsible for negotiating lower drug prices - to do it for her. Savageau was behind the direct-to-employer contract with Henry Ford.
Cutting out middlemen that are part of the employer health benefits picture has been on her mind for a while now, especially when it comes to keeping down prescription drug costs.
"I've asked myself for quite a while now, 'Well, why am I going to the pharmacy benefit manager? Why wouldn't I go directly to a manufacturer? What services do I need from the pharmacy benefit manager? Can I get those and use them as more of a third-party administrator? Could I set those services up myself?'" she told BI in an interview.
For Savageau, the best way to start was by working directly with a health system so that she could ensure doctors would be motivated to keep GM's employees healthy.
"For years I've been going, 'How do we get to the physician to start controlling some of those expenses coming down the pike?'" she said.
Downgrading the role of insurers by working more directly with health systems or drugmakers could be the approach taken by employers like JPMorgan, Amazon, and Berkshire Hathaway, which formed an independent venture aimed at lowering healthcare costs for their employees.
One of the strategies the venture could take is to create its own alternative health plan built around their priorities, much like GM's doing.
"We're already the insurance company, we're already making these decisions, and we simply want do a better job," JPMorgan CEO Jamie Dimon told Business Insider in February.
The changing role of health insurers for self-insured employers
Under GM's Henry Ford Health System plan, GM's insurer Blue Cross Blue Shield of Michigan will still be involved to process claims and some customer service inquiries, though it didn't have a hand in setting up the plan and its benefits.
Instead, GM did that directly with the health system. It's a departure from the model in which a health insurer does most of the plan structuring for the employer, referred to as a carrier model.
"I get concerned with the carrier based model, and the reason I do is because it serves to benefit GM members and/or families," Savageau said. "With the direct contract, the difference is, I know my data, and that contract is directly around the improvements I want to see around my GM population." But when it comes to a health insurance company setting up the plan, it might have goals that aren't going to ultimately benefit GM's employees.
Ultimately, Savageau answers to GM's chief financial officer, who asks what GM's doing to manage their healthcare spending. It keeps her looking a few years out to see what else the company can do. It doesn't help that companies in the healthcare industry are also thinking of new ways to make money off the system.
"They're being as creative as I'm being," she said.