Employers Expect 2018 Benefit Costs to Rise $14K Per Employee

August 09, 2017 - Large employers will have to rely on healthcare delivery innovations and cost management strategies as employers face a 5 percent rise in the cost of providing employee healthcare benefits, according to a National Business Group on Health (NBGH) survey.

The Large Employers’ 2018 Health Care Strategy and Plan Design Survey found that the total cost of healthcare is estimated to be $13,482 per employee this year, and projected to rise to an average of $14,156 in 2018.

According to the survey, large employers reported that this was the fifth consecutive year where benefit costs for their employees rose by 5 percent, citing specialty pharmacy costs as the top driver for increasing costs.

Employers will cover nearly 70 percent of rising costs while employees be accountable for roughly 30 percent, or nearly $4,400 in 2018.

To address rising costs, employers are looking to implement effective cost management procedures that lower healthcare costs for employer groups and employees alike.

“Employers are recognizing that traditional cost control techniques alone aren’t able to reduce costs to the point where they are no longer a drain on the bottom line,” said National Business Group on Health President and CEO Brian Marcotte.

“While employers continue to address costs through health care management and plan design efforts, they are also ramping up efforts to positively affect the supply side of the health care system by pursuing health care payment and delivery reform initiatives.”  

The strategies reported by NBGH include telehealth, pricing negotiation, and market competition leverage to help mitigate care costs. These strategies are almost identical to the findings in a recent Willis Watson Towers survey that reported employer adoption of necessary cost management tools and design benefit adjustments.

The NBGH found that flexible healthcare access options and partnering with value-based care facilities like accountable care organizations (ACOs) were the most popular cost management strategies.

Telehealth implementation

Almost all employers surveyed – 96 percent – will make telehealth services available in states where it is allowed next year. More than half plan on offering telehealth for behavioral health services. About 20 percent of employers saw employee utilization rates of 8 percent or higher this year.

ACO promotion

Twenty-one percent of employers plan to promote ACOs in 2018, with that number possibly doubling by 2020 as another 26 percent consider offering them in their benefit strategy.

“Employers are slightly more confident about the ability of ACOs to improve healthcare quality beyond what the system does today, compared to reducing costs,” the study said.

Employer-operated health centers on worksites

Roughly 54 percent of employers will offer onsite or near site health centers in 2018. Employer health centers help to improve employee health by increasing direct healthcare access at an employee’s workplace.

Use of bundled payments through Centers of Excellence (COEs)

Eighty-eight of employers expect to use COEs in 2018 for certain procedures such as transplants or orthopedic surgery. Bundled payments and other types of alternative payment arrangements will be used by 21 to 48 percent of COEs contracts, depending on the medical service, according to the survey.

Consideration for value-based design benefit plans

Nearly 40 percent of employers incorporated some value-based benefit design where employees receive reduced cost sharing, or premium reductions, when they initiate management of their chronic conditions. Based on survey findings, the increase in the use of value-based benefit design to steer employees toward telehealth jumped from 16 percent in 2018 versus 18 percent in 2018.

Other considerations employers highlighted in their cost management strategy include the use of Consumer-Directed Health Plans (CDHPs) and site of care management tactics for pharmacy costs. Nine out of 10 employers will offer at least one CDHP, and 44 percent will implement site of care pharmacy management tactics.

Notably, the most popular strategies are consumer-facing where healthcare is focused on enhancing the healthcare experience and post-care health outcomes.

“One of the most interesting findings from the survey is that employers are focused on enhancing the employee experience,” Marcotte said.

“For example, there is a big increase in the number of employers offering decision support, concierge services and tools to help employees navigate the healthcare system. The complexity of the system and proliferation of new entrants has made it difficult for employees to fully understand their benefit programs, treatment options and where to go for care,” he added.