Human Capital

Companies Move to Limit Employees’ Health Costs

Most large and midsize employers hit "pause" on requiring workers to pay more out-of-pocket for health services.
David McCannNovember 4, 2019

Health care costs will top $13,000 per employee this year, according to Mercer’s annual National Survey of Employer-Sponsored Health Plans.

The average total health benefit cost per employee grew 3.0% to reach $13,046, following a rise of 3.6% in 2018. This is the eighth consecutive year of health benefit cost growth in the low single digits, and employers expect the cost to rise at a similar pace next year. Still, cost increases continue to outpace overall inflation.

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Results of the survey, which polled 2,558 employers, show that diverse workforce needs are increasingly shaping health program design. When asked about their priorities for the next five years, 42% of large and midsize employers (500 or more employees) identified “addressing health care affordability for low-paid employees” as an important or very important strategy.

And in fact, in 2019, most large and midsize employers hit “pause” on requiring members to pay more out-of-pocket for health services as a way to hold down premium costs.

The average individual deductible in a preferred provider organization (PPO), the most common type of medical plan, rose just $10 in 2019, to $992. By contrast, the average deductible rose by more than $250 among small employers (10 to 499 employees), which typically have less ability to absorb high cost increases and fewer resources to devote to plan management.

Even more telling, some larger employers that had offered a high-deductible plan with a health savings account (HSA) as the only medical plan reversed course and added a traditional PPO or health maintenance organization (HMO) as an option. This trend was especially notable among employers with 20,000 or more employees: those offering only a high-deductible plan fell from 22% to 16%.

“This doesn’t mean HSA plans are going away, but to meet the various needs and budgets of today’s five-generation workforce, employers are increasingly offering an array of health benefit plans,” said Tracy Watts, Mercer’s national leader for U.S. health policy. “In fact, many employees who do the math at open enrollment find an HSA is a smart financial move. But for those with little savings or significant health issues, another plan might be a better fit.”

Enrollment in high-deductible account-based plans rose from 33% of all covered employees last year to 36% in 2019. These plans are offered by 71% of large and midsize employers, up from 68% in 2018, and 37% of small employers.

Innovative Solutions

As employers look for cost-management strategies that do not shift cost to employees, many are turning to innovative tech-enabled programs that help employees manage chronic conditions such as musculoskeletal conditions, infertility, and insomnia, or other health care needs.

In 2019, 58% of all large and midsize employers, and 78% of those with 20,000 or more employees, offer one or more of such targeted health care solutions.

“Typically the goals of these programs are empowerment, convenience, and lower costs,” said Watts. “For example, a physical therapy app that reminds patients when to do prescribed exercises, provides instructions, and even counts reps could mean fewer trips to a clinic, less out-of-pocket cost for the employee, and a better outcome.”

The survey also revealed another surge in telemedicine, with nearly 9 out of 10 employers now offering a program to their members. This tech-enabled service expands access to care and is designed to reduce out-of-pocket spending: Telemedicine visits are typically less than half the cost of an office visit.

Telemedicine utilization is growing, although slowly. Last year, among employers offering it, on average 9% of eligible employees used telemedicine, up from 8% the prior year, and about one in seven employers reported utilization of 20% or higher.

Importantly, 41% of large and midsize employers say that all or most of their benefit offerings are accessible to employees on a single, fully integrated digital platform (most often through a smartphone app), up sharply from 34% in 2018. According to Watts, “It has to be easy to find these resources, or they won’t get used. One-stop shopping has been a missing ingredient, and now it’s finally here.”

Sky-high Claims

Employers are using innovative patient-centered programs to address what is by far the biggest source of health plan cost: complex care. As medical science produces an unending stream of sophisticated new treatments and drug therapies, the incidence of high-cost claims is rising, driving up the cost of coverage. Managing these high-cost claims is the top health care priority for employers over the next five years, according to the survey results (see chart below).

Programs that provide intensive support and advocacy to employees faced with a serious medical issue can improve the patient experience — and even care outcomes — while lowering cost. The largest employers are taking the lead in offering enhanced health advocacy and intensive case management services, as well as programs that make it easy for members to seek an expert medical opinion on a diagnosis or their treatment plan.

“Health advocates help patients and their families navigate a complex health care system to get to the right provider at the right time. When care is better coordinated, we often see less wasteful healthcare spending,” said Watts.

High-cost specialty drugs, such as those used in cancer treatment, are often a factor in high-cost claims. While spending on all prescription drugs rose 5.5% in 2019 among large and midsize employers, spending on specialty drugs rose 10.5%.

Over half of all large and midsize employers (52%) and over three-fourths of those with 20,000 or more employees (78%) now steer employees to a specialty pharmacy, which typically provides enhanced care management. For example, some drug therapies can be administered at home at less cost and greater convenience for the patient and family.

Source: Mercer National Survey of Employer-Sponsored Health Plans, 2019