Copyright Scott Olsen, Getty Images
Employee Medical Testing

Employers Revise Plans as Health Benefits to Cost $15,000 per Employee

Aug. 13, 2018
“Health care cost increases continue to outpace workers’ earnings and increases in inflation, making this trend unaffordable and unsustainable over the long term,” said Brian Marcotte, CEO of the National Business Group on Health. “

Costs for providing health care benefits for employees continue to rise and in 2019 it's expected to hit nearly $15,000, according to the National Business Group on Health.

Employers project the total cost of providing medical and pharmacy benefits will rise 5% for the sixth consecutive year in 2019. Including premiums and out-of-pocket costs for employees and dependents, the total cost of health care is estimated to be $14,099 per employee this year and projected to rise to an average of $14,800 in 2019.

The group's survey, The Large Employers' 2019 Health Care Strategy and Plan Design Survey, released last week, revealed that employers will increasingly be playing an activist role in changing the health care delivery system and reexamining existing models

“Health care cost increases continue to outpace workers’ earnings and increases in inflation, making this trend unaffordable and unsustainable over the long term,” said Brian Marcotte, CEO of the National Business Group on Health. “No longer able to rely on traditional cost-sharing techniques to manage costs, a growing number of employers are taking an activist role in shaking up how care is delivered and paid for.” 

Employers will cover roughly 70% of those costs; employees will bear about 30%. Employers cited high-cost claims, specialty pharmacy, and specific diseases as key drivers of cost increases.

Indeed, nearly half of respondents (49%) are either driving changes in the delivery system directly or through their health plan, leveraging digital solutions, or both. For example, 35% are implementing alternative payment and delivery models such as Accountable Care Organizations (ACOs) and high- performance networks (HPNs) either directly or through their health plan. 

Direct contracting with health systems and providers is expanding, from 3% in 2018 to 11% in 2019.  Direct contracting between employers and Centers of Excellence (COEs) is also rising sharply, from 12% this year to 18% next year.  Cancer, cardiovascular and fertility COEs are experiencing the greatest growth.

Virtual Care

More than half of employers (52%) believe virtual care will play a significant role in how health care is delivered in the future while 43% believe Artificial Intelligence will play a major role.

In fact, half of employers (51%) identified implementing more virtual care solutions as their top health care initiative in 2019. Virtual care has branched out well beyond physician consultations to include digital coaching, condition management, remote monitoring, physical therapy and cognitive behavioral therapy, all of which show the greatest potential for growth over the next several years. 

“The growth in virtual solutions largely reflects employer frustration with the pace of change in how health care is delivered,” said Marcotte.

“Interestingly, seven in ten employers believe new market entrants from outside the health care industry are needed to disrupt health care in a positive way.  These disruptors include innovators from Silicon Valley and elsewhere, and employer coalitions.”

Pharmaceutical Supply Chain

The survey also found nearly all employers believe the pharmaceutical supply chain needs to change --   14% said it needs to be more transparent, 35% stated rebates need to be reduced while half stated the pharmaceutical supply chain is inefficient and too complex and needs to be overhauled and simplified.

Additionally, three in four employers do not believe drug manufacturer rebates are an effective tool for helping to drive down pharmaceutical costs and over 90% would welcome an alternative to the rebate-driven approach to managing drug costs.

“Contracting within the pharmaceutical supply chain has not kept pace with today’s plan design reality,” said Marcotte.  “The rebate-driven supply chain model is antiquated given the growth in high deductible plans and is ripe for change.”

According to the survey, more than half of the survey respondents are concerned that rebates do not benefit consumers at the point-of-sale.  A growing number of companies (27%) are adopting recently developed capability by pharmacy benefit managers to pull rebates forward at the point of sale to benefit consumers. Another 31% are considering implementing point of sale rebates in the next few years.  

Also, for the first time, employers are retrenching somewhat on account-based plans, though they are still widely offered. Employers offering full replacement Consumer Directed Health Plans will shrink from 39% this year to 30% in 2019, the first time in four years fewer employers will offer these plans.

Among other findings from the survey include:

Industry consolidation impact:  While 26% of employers are optimistic that mergers between health plans and PBMs will have a positive impact on cost, quality and consumer experience, the majority of employers are skeptical that they will see improvement from consolidation.

Opioids in the workforce concern: A majority of employers (55%) are very concerned over the impact of prescription opioid abuse on the workforce.  Employers are working with their partners to implement multiple strategies to change prescribing patterns and increasing access to alternative therapies.

Behavioral health benefits expansion:  Three in ten large employers will conduct anti-stigma campaigns next year to reduce the stigma that exists around mental health conditions and treatment.  More than half will offer self-directed online resources.

About the Author

IW Staff

Find contact information for the IndustryWeek staff: Contact IndustryWeek

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!