John Locke Update / Research Newsletter

Union County Saving Big On Health Care Costs With DPC Option

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I’ve written before how direct primary care (DPC) networks help private, self-insured employers like Amazon and Expedia save big on health care claims. Incorporating an additional benefit option for workers to have a doctor spend more time managing their health care needs in either an on-site or near-site clinic has proven to reduce unnecessary emergency room visits, specialist referrals, and inpatient admissions. 

Success can also be found in the public sector. In North Carolina, Union County is on track to save $1 million in health care claims under its first year contract with Paladina Health — an innovative health care delivery organization within the DPC movement. According to Union County HR Executive Mark Watson, the county is the first public, self-insured employer in the state to offer this type of plan, starting in April 2015. 

That’s $1 million saved on just 37 percent of Union County’s 1,983 covered lives who seek preventative care from a board-certified physician at Paladina’s near-site clinic. The clinic is conveniently located near the sheriff’s office, Human Services, and other government buildings.

Imagine the savings that could accrue across the state if more counties set out to make direct care a reality for their employees and dependents. In a time where health care costs continue to rise faster than the rate of general inflation, it’s a smart move to make.

Granted, employers have been combatting rising health care costs by transitioning their workers from comprehensive plans to consumer-driven health plans (CDHPs). These plans come with lower premiums and higher out of pocket cost sharing, and they are paired with either a tax-preferential health savings account (HSA) or health reimbursement account (HRA). The idea behind CDHPs is that when policyholders are responsible for a higher portion of out of pocket medical expenses, they will be more cost-conscious and shop around for the best value for health care dollars spent. 24 percent of workers are enrolled in these types of plans.  

Consumer-driven plans don’t come without criticism, however. For the healthy and high wage earners, making the switch may not be so much of a problem. But it can impose financial burdens on low-wage workers and for those who frequent the health system.

Union County was an early adopter in providing its employees with a CDHP starting in 2003. Watson says that such benefit packages can yield high satisfaction rates if they are designed and managed properly. Union County workers pay a maximum $2,750 out of pocket until the employer picks up the cost. Not a bad deal considering that some plans nowadays have policyholders cough up $6,000 for an individual plan before the insurance company kicks in.

Watson and other key players then took an additional step to optimize the consumer-driven model by bringing in Paladina Health. Adding the DPC option has not only saved Union County on claims, but has improved health outcomes for almost 70 percent of patients. With the luxury of around-the-clock care and longer appointments, Paladina physicians enhance patient engagement and guide them to find the best value for medical decisions that fall outside a primary care setting.

Direct care models like Paladina’s make consumer-driven plans more appealing for patients with varying degrees of health risk. They have the potential to radically transform the delivery of health care for the benefit of patients, employers, and taxpayers. 

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Katherine Restrepo is the Director of Health Care Policy at the John Locke Foundation. Before joining the John Locke Foundation, she interned at the Cato Institute under the direction of Michael Cannon, Director of Health Policy Studies. Katherine’s… ...

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