With the White House and U.S. Congress failing to agree on healthcare changes, 38 large companies – including American Express, Johnson & Johnson and Macy’s – are taking matters into their own hands by uniting to form the Health Transformation Alliance (HTA) in an attempt to cut employee healthcare costs. The group hopes to use its combined power and influence to address what it calls a “patchwork of complicated, expensive and wasteful systems.”

The HTA plans to build on individual corporate accomplishments in healthcare to bring “increased innovation, better analysis of the latest data, and greater leverage” to issues companies face when providing healthcare to their employees.

The Health Transformation Alliance’s Four Critical Healthcare Areas

To accomplish its goals, the HTA plans to focus on four critical healthcare areas.

  1. Need for Efficiency – Large companies contract with various organizations and providers to offer healthcare services to their employees. By pooling both the resources and expertise of member companies, the HTA hopes to gain leverage and institute more efficiency in providing appropriate care to all employees.
  2. Use of Data When it comes to business, companies know how to study and use big data to their advantage. HTA hopes to do the same with medical data to zero in on best treatments, better outcomes and cost efficiency.
  3. Employee Education By combining knowledge and resources, HTA expects to be able to offer better and more helpful tools to employees to help them understand both the pros and cons of various healthcare choices.
  4. Drug Costs The HTA believes that changing and improving inefficient purchasing and contracting systems, as well as providing drug-efficacy information to both doctors and patients, will help drive down healthcare costs and eliminate counterproductive incentives.

    A Plan for Action

    Healthcare costs represent about 18% of America’s gross domestic product. With HTA member companies providing health insurance to six million employees, efficiencies achieved by HTA on behalf of its members would translate across the entire U.S. economy. By the end of 2018 the HTA hopes to make progress in three key areas: drug prices, data analysis and specialized physician networks.

    Drug Prices and PBMs

    Companies and large organizations hire pharmacy-benefit managers (PBMs) to negotiate discounts with pharmaceutical companies and retail pharmacies. The idea is that PBMs keep costs down by guiding patients to less expensive treatments, generic drugs or brand-name drugs from pharmas with which the PMB has negotiated a large rebate.

    The problem is that PBMs tend to keep part of the negotiated discounts and rarely divulge that information to their corporate customers. HTA’s plan is to do business with just two PBMs – UnitedHealth’s OptumRx and CVS’s Caremark. This will allow employers to pay less and receive more consistent pricing. More important, HTA plans to seek greater transparency, guaranteed rebates and the right to audit its PBMs. (For more, see Why Pharmacists Can’t Warn You About Over-Priced Drugs.)

    IBM’s Watson Software

    Also, in 2017 the alliance plans to use IBM’s Watson software to provide analysis that will help alliance members choose the drugs that and doctors who provide the most value. The analysis will start with about four years of data from each member company. This will include pharmacy and insurance claims, and aggregated employee electronic health records. Watson should also be able to predict which employees are most likely to develop chronic diseases, such as diabetes, and recommend proactive treatment to help prevent their onset. (For more, see IBM's Watson Turns Its Eye to Medical Diagnostics.) 

    Healthcare Providers

    Finally, by 2018 the HTA hopes to more directly manage patient care by contracting with doctors and other healthcare providers, starting in Phoenix, Chicago and Dallas-Fort Worth. Initial treatments will be for diabetes, hip and knee replacements, and lower-back-pain issues. The contracts will be negotiated and administered by Cigna Corp. and UnitedHealth, and will be designed to pay physicians based on how well they meet certain healthcare targets, such as how quickly patients recover, instead of paying for each procedure and test performed.

    The Bottom Line

    The U.S. Department of Labor (DOL) has ruled that the HTA is not an employee welfare benefit plan, meaning that Title I of the Employee Retirement Income Security Act of 1974 does not apply. The DOL also said that HTA is not a multiple employer welfare arrangement. This is because the HTA provides companies with services but has no direct connection to employees or employee benefits.

    Membership in the HTA is limited to large employers that are members of the HR Policy Association, which eliminates small employers from participation. IT's too early to know how the HTA’s negotiations will affect either the corporations' own costs or the bulk of healthcare consumers outside of the group.