With all the tumult in Washington, D.C. surrounding health care reform, it is hard to know which reforms will be prioritized at the federal level and whether provider payment reform will still be a central focus. But in some corners of the health care Marketplace, efforts to implement payment reform continue, building on experimentation to better understand how to increase value. These efforts are coming from private employers, other large purchasers of health care, and the health plans that act as their agents.

While employers are sure to be affected in many ways by changes to federal health care laws, much of the cost and quality conundrum that has troubled our health care system for decades can be influenced by ongoing payment reforms and benefit design efforts in the private sector.

As of 2015, employer-sponsored insurance covered nearly 56 percent of the US population, or 147 million people. And employers will continue to cover more Americans than the Affordable Care Act’s 20 million no matter what happens in Washington over the next few years. Because they cover more people than Medicare and Medicaid combined, employers could have a great deal of power over health care system reforms. But they need to use it.

Employers can leverage their influence through aligned sourcing, a term that we at Catalyst for Payment Reform use for speaking with one voice on priority issues when it comes to the buying of health care. If employers and other health care purchasers work together to demand change from health insurance companies, they can bring their purchasing power to bear on the issues that keep them awake at night.

Here are the issues that many employers and other health care purchasers tell us should be prioritized in the coming year.

Maternity Care

For most purchasers, maternity care is a high cost and practiced by providers without sufficient adherence to evidence-based guidelines. According to the Centers for Disease Control and Prevention, cesarean deliveries remain persistently high at 32 percent of births, far above the goal of 10 percent that the World Health Organization says makes medical sense. Cesarean deliveries are not only more expensive than vaginal deliveries, but they lead to worse outcomes for mothers and babies. At the same time, the Leapfrog Group reports good news related to the drop in the rate of early elective deliveries, which occur when women by choice and without medical necessity deliver babies before they are full term. This rate has plummeted to less than 2 percent from 17 percent in 2010. A combination of public reporting efforts on these rates, quality improvement initiatives, and decisions by payers not to pay for them, has had a significant impact.

Similar headway could be made in reducing the cesarean rate for low-risk births by changing how we pay health care providers for labor and delivery services. Purchasers can encourage health plans to change the relative amounts we pay for cesarean and vaginal deliveries so that it is not so relatively lucrative to deliver babies by cesarean compared to vaginal deliveries. Reforms to how health plans pay for deliveries can also make a difference. For example, the use of bundled payments can encourage providers to collaborate and provide care more efficiently. In addition, purchasers can push health plans to find ways to incorporate lower-cost, high-quality alternative providers into the mix, such as certified nurse midwives, laborists, and free-standing birth centers.


Traditional strategies, such as formulary management, step therapy, and use of generics, continue to play a role in managing pharmacy costs but are inadequate to address the ever-rising costs of drugs. Despite recent news coverage and political attention focused on products such as Harvoni (medication used to treat hepatitis C) and EpiPens (epinephrine injection used to treat severe allergic reactions), the overall increase in drug costs has not been affected by efforts to shame down the cost of new drugs. Employers and other large health care purchasers can engage in more aggressive strategies to influence drug pricing, starting with a push for greater transparency on how the money flows among manufacturers, distributors, pharmacy benefit managers, health care providers, health plans, and pharmacies.

For the part of the pharmacy benefit that health plans control, purchasers can push health plans to apply payment reforms onto health care providers and pharmaceutical companies to create the right incentives. For example, bundled payment and other population-based payments for the total cost of care may encourage health care providers to be judicious in their prescription of high-cost drugs or where they arrange for their patients to receive them. Bonus incentive payments to providers for using equally effective but more cost-effective therapies (if they exist), non-payment policies, and pay-for-drug performance (also known as outcomes-based contracting) are being tested today and are worthy of further experimentation. Purchasers can also make sure their contracted health plans are directing patients to high-quality, lower-cost sites of care, particularly in situations where receiving a drug that requires the help of medical personnel can be far cheaper outside of the hospital (for example, home infusion versus hospital-based infusion).

Behavioral Health

Behavioral health is a term commonly used to refer to mental illnesses (such as stress, anxiety, and depression) and substance use disorders (such as alcohol and drug addiction). Twenty-five percent of adults experience mental illness or a substance use disorder every year, and these common problems affect the health and productivity of employees. Mental health issues are also often associated with other chronic illnesses. Depression is especially common among those with a chronic illness, such as diabetes, resulting in their lower adherence to clinical recommendations, worse physical functioning, and higher cost. Total costs associated with mental illness were approximately $70 billion in 2013 (latest numbers available), and private purchasers feel the impact of these increasing costs.

There are several ways purchasers can address the challenges posed by the behavioral health care needs of their populations. For starters, they can ask health plans how they are supporting the integration of behavioral health care with medical services, whether through the design of their contracts with primary care physicians or through accountable care organizations that bring together all types and levels of providers to care for the holistic health care needs of a population. Are the plans also ensuring access to behavioral health services and reducing barriers to care? Purchasers have pushed for mental health visits on a telehealth platform to ease access and are asking health plans to begin applying the same payment reform approaches that they use with medical providers to behavioral health providers. These steps will also require the development and use of standard quality measures in behavioral health.

Making Progress

Progress can only come once a critical mass of health care purchasers ask for the same thing at the same time from the health plans that build and administer benefits for their populations. Certainly, some health plans perceive their own business case for reforms. But if the customers’ “to do” lists are too long and filled with disparate “asks,” health insurance plans may not know where to focus. “Aligned sourcing” can create the demand for high-value purchasing approaches, including provider payment reform and innovations in benefit and provider network design. The more purchasers share priorities for what they demand of health plans, the stronger and more consistent the signal and the higher the likelihood of securing changes in the Marketplace.

With so much uncertainty about the future of the federal reform movement, employers can and should continue to support experimentation with payment and delivery reforms. No one knows yet which reforms have the most powerful effect on prices and quality, and the answer will only come through more widespread experimentation and analysis.

At the same time, to measure progress, we need adequate insight into how these changes affect the quality and costs of care as well as the patient experience. Standardized, timely reporting back to the purchaser on the impact of such programs is critical.

So, while the nation struggles to find a pathway toward a sustainable health care system, employers and other large purchasers of health care, in partnership with their contracted health plans, can play a larger role in shaping payment reforms and benefit designs that promote quality and reduce costs.