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Large Employers Expanding Efforts to Stem Rising U.S. Health Benefit Costs

Health care benefits costs in the United States are projected to climb another 5% in 2020.


In response, large employers (those with more than 5,000 employees) are ramping up their efforts to stem the increases, according to the “2020 Large Employers’ Health Care Strategy and Plan Design Survey” released by the National Business Group on Health. The 147 large employers surveyed, which represent more than 15 million employees, identified implementing more virtual care solutions (51%) and a more focused strategy on high-cost claims (39%) as their top initiatives for 2020. The survey also found that managing prescription drug benefits costs remains a high priority for employers in 2020. 

“It’s noteworthy that more than half of employers are focused on delivering virtual health care initiatives — digital coaching, mental health, physical therapy, sleep support and more,” said Steve Boddy, director of content at WorldatWork. “When these offerings originally surfaced, it was with a focus on convenience for core primary care visits. This area has quickly evolved to offer employees a full digitally-enabled continuum of care.” 

The 5% increase is identical to 2019’s projected increase, but actual costs are coming in lower. Large employers reported the actual increase in 2018 was 3.6%. Including premiums and out-of-pocket costs for employees and dependents, the total cost of health care is estimated to be $14,642 per employee in 2019 and is projected to rise to an average of $15,375 in 2020.  Employers will cover nearly 70% of costs while employees will bear about 30%, or nearly $4,500.

“One of the challenges employers face in managing their health-care costs is that health care is delivered locally and change is not scalable. It’s a market-by-market effort,” said Brian Marcotte, president and CEO of the National Business Group on Health. “Employers are turning to market-specific solutions to drive meaningful changes in the health care delivery system.”

The survey also revealed that 36% of employers will view their health-care strategy as an integral part of their workforce strategy in 2020, up from 27% in 2019.

“Investments in health and well-being are key to deploying the most engaged, productive and competitive workforce,” Boddy said. “This is why employers are increasing their efforts to improve their health benefits offerings amid rising costs, and we expect this trend to continue.”  

Employer interest in alternative payment and delivery models — including accountable care organizations (ACOs) and high-performance networks (HPNs) — remains strong. Nearly a third (31%) plan to implement either or both strategies in select markets in 2020 — either directly or through their health plan — and that percentage could nearly double to 60% by 2022.

Interestingly, 49% of respondents plan to pursue an advanced primary care strategy in 2020 and another 26% are considering one by 2022. One-third of employers (34%) will deliver advanced primary care through an onsite or near-site health center, while a growing percentage of employers (24%) are looking to directly contract with advanced primary care models in select markets.

Employers Embracing More Virtual Care Solutions
Employers continue to focus on broad-based solutions as they pursue local market opportunities.  The number of employers who believe virtual care will play a significant role in how health care is delivered in the future continues to grow (64% for 2020 vs. 52% for 2019). The majority of respondents (51%) will offer more virtual care programs next year. Nearly all employers will offer telehealth services for minor, acute services, while 82% will offer virtual mental health services — and that could grow to 95% by 2022. Virtual care for musculoskeletal management shows the greatest potential for growth: While 23% will offer musculoskeletal management virtual services in 2020, another 38% are considering it by 2022.

 “Virtual care solutions bring health care to the consumer rather than the consumer to health care,” Marcotte said. “They continue to gain momentum as employers seek different ways to deliver cost effective, quality health care while improving access and the consumer experience. Of particular note is the growing interest among employers to offer virtual care for mental health as well as musculoskeletal conditions.”

Pharmacy Benefits Costs a High Priority
Managing pharmacy benefits, and especially the high cost of specialty drugs and therapies, remains a top priority for employers. The survey found 85% of respondents rate high-cost drugs as the number one or two most concerning pharmacy issues. According to the survey, 20% will have a point-of-sale rebate program in 2020, and that number could triple to 60% by 2022. Two thirds (67%) favor a model based on net price of medications with no rebate as an alternative.

Other key survey findings:

  • The number of employers offering full replacement consumer-directed health plans will shrink to 25% in 2020, down from 30% this year and 39% in 2018. Instead, employers will offer more plan choices like a preferred provider organization (PPO) plan.
  • While 72% of employers believe “Medicare for All” will reduce the number of uninsured, 81% believe it will increase taxes; roughly half say it will lead to higher health costs (57%) and higher employee costs (47%). Employers are mostly divided on whether to expand Medicare below age 65.

About the Author

Brett Christie is a staff writer at WorldatWork.

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