Human Capital & Careers

Plan-Design Changes Have Less Impact on Health Costs

Employers expect to cut way back next year on shifting health costs to their workers.
David McCannAugust 2, 2017
Plan-Design Changes Have Less Impact on Health Costs

Companies may finally be running out of ways to hold their health costs in check by tinkering with plan design, new research suggests. Plan-design changes generally reduce participant benefits, increase participants’ share of total costs, or both.

ThinkstockPhotos-75627477In its annual Best Practices in Health Care Employer Survey, Willis Towers Watson reports the health-care cost trend both before and after plan-design changes. This year’s survey, of 555 employers with at least 1,000 employees, projects that in 2018 the differential between the two statistics will be the smallest — half a percentage point — since the consulting firm began reporting it in 2007.

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The report indicates that employers’ health-care costs will rise by an average of 6.0% next year, and that they expect to make plan-design changes that will ease the hit to 5.5%. In no other year has that differential been less than a full percentage point.

Also, the 5.5% increase after plan adjustments will be the highest since 2012, when the trend was also 5.5%. For 2017 that figure is expected to be 4.6% by year-end.

Shifting more of the cost to employees is becoming a less-popular strategy because they may not be able to tolerate it after many years of seeing their health costs climb, Brian Marcotte, CEO of the National Business Group on Health, told CFO in May.

Julie Stone, a national health-care leader at Willis Towers Watson, notes that the reluctance to offload more costs to employees is occurring in tandem with “the public conversation about significant increases in the cost of coverage available to individuals through the public marketplace and the risk of blurring the line between employer and individual coverage through the eyes of employees.”

The survey also reveals that despite uncertainty about the future of health care owing to the legislative stalemate in Congress, 92% of survey participants said they are “very confident” they will still be sponsoring health benefits in five years. That’s the highest figure reported by the Willis Towers Watson survey since passage of the Affordable Care Act in 2010.

However, Stone cites uncertainty over the potential repeal of the ACA as another factor contributing to the low expectations for savings from plan-design changes in 2018. “Many employers were in a ‘wait-and-see’ mode earlier this year when the majority of design changes for 2018 were being evaluated,” Stone says. “So we see the narrowing [between health-care costs before and after plan-design changes] as more reflective of a reluctance to implement change than it is an actual financial indicator.”

Meanwhile, employers are pursuing a wider array of approaches to reduce health-care costs and risk. These include encouraging patients to use preferred providers for health-care delivery (such as telemedicine, centers of excellence, and high-performance networks); emphasizing better outcomes and cost savings in high-priority clinical conditions such as diabetes, musculoskeletal health, and mental health; and selecting partners based on their ability to achieve demonstrably improved outcomes as well as hold the line on cost.

Employers also aim to enhance employees’ engagement in their health by increasing the choice of benefit plans, improving decision support, and offering health wearables and mobile apps.