The Positive Impact of Direct Primary Care on Employer Healthcare Spending

In the ever-evolving landscape of healthcare, Direct Primary Care and Subscription-based Primary Care are emerging as promising models that could significantly benefit both employers and employees. Studies conducted by the Society of Actuaries (SOA) and Milliman provide valuable insights into these new models of healthcare delivery and financing.

DPC and Subscription-based Primary Care are healthcare delivery models where a provider offers unlimited specified routine healthcare services for a monthly fee. These models simplify the healthcare business by removing insurance companies from basic primary care. In exchange for a monthly, out-of-pocket fee, patients have unrestricted access to their physician and unlimited access to a defined package of services.

The potential benefits of these models for employers are vast. One of the key advantages is that they may provide employees and dependents with increased access to primary and urgent care services, from the same provider at no cost. This could also include access to no-cost or low-cost basic labs and prescription drugs.

Moreover, these models could lead to lower absenteeism rates among employees. This is because appointments can generally be scheduled at almost any time and wait times at the office are usually shorter. This flexibility can significantly improve the work-life balance for employees and increase their overall job satisfaction.

The SOA study provides some interesting data points. For instance, it shows that DPC can lead to a decrease in healthcare costs in various areas. The unadjusted DPC vs. traditional healthcare cost differences show a decrease of 12.78% for inpatient total costs, 49.81% for outpatient emergency department costs, and 28.05% for other outpatient costs.

The Milliman study further elaborates on the distribution channels for subscription-based primary care products. These channels include direct-to-consumer, direct-to-employer, and direct-to-payer. The study emphasizes that these models can address both the needs of enhancing consumer access to care, quality of care, and satisfaction with their overall care journey, as well as affecting an employer’s total cost of care.

The Milliman study also highlights the Pareto Principle, which states that 80% of healthcare expenditures come from 20% of patients. This principle is instructive for the design of primary care products, especially those targeting the majority cohort with limited and more transient healthcare needs.

Furthermore, the study provides a snapshot of the sources of health insurance coverage in the United States. As of 2019, 49.6% of the population was covered by employer-sponsored group insurance, 19.8% by Medicaid, 14.2% by Medicare, 5.9% by non-group (i.e., individual), and 1.4% by military. However, 9.2% of the population remained uninsured. These figures are important to consider when designing healthcare products, as consumers with different sources of coverage (or no coverage) have different experiences when they access and pay for healthcare.

Lastly, the study discusses the Quadruple Aim in healthcare, a set of principles many purchasers of healthcare consider a north star. The Quadruple Aim includes better health outcomes, improved patient experience, lower health costs, and improved clinician experience. A successful primary care product should meet these aims.

Despite the challenges, the potential upside of DPC and Subscription-based Primary Care for both employers and employees is significant. For employers, it can lead to lower healthcare costs and increased productivity. For employees, it can mean better access to healthcare, lower out-of-pocket expenses, and improved health outcomes. The SOA and Milliman studies provide a comprehensive evaluation of these models, highlighting their potential to transform the healthcare landscape. As more employers consider implementing these models, it's crucial to understand the potential benefits and challenges associated with these innovative models.

For more detailed insights, you can access the full studies here and here.