Unsurprisingly, health-care costs for large companies will again increase this year, and employers will bear the brunt given the tight labor market.
Large-company executives project health-care costs for 2023 (at the median) to come in at 6% higher than in 2022 after accounting for changes in the design of medical benefit plans, according to the Business Group on Health’s annual survey.
They also expect a 6% bump in 2024. Those are the highest projections in seven years. In general, employer projections are usually higher than the actual increases they experience, except for 2021. Actual costs that year jumped 8.2% because the pandemic backlog began to clear. Employer changes to health-care benefits often can shave a percentage point off any expected increases.
The average health-care cost per worker is projected to reach $17,200 in 2023, up from $15,862 in 2022, according to the Business Group on Health survey.
While workers’ out-of-pocket costs are projected to increase mildly for employees in 2023, to $1,831 from $1,715 last year — their contribution to health-care insurance premiums has remained fairly steady since 2019 at between $2,700 and $2,900.
Meanwhile, the per-capita contributions for large employers are projected to increase 14% in 2023 to $11,762. That’s a larger-than-usual jump. It’s also 23% higher than the 2019 average of $9,541.
The BGH surveyed 152 large employers across varied industries, covering more than 19 million people in the United States, between June 1 and July 18. Most of them had more than 10,000 employees.
Concerns about pharmacy costs, prevalent for quite some time, were again evident in employer survey responses. The median percentage of health-care dollars spent on pharmacies for the surveyed employers rose to 24% in 2022, up from 21% a year earlier.
Besides just the general cost trend, most employers (about 90%) are very concerned or concerned about high-cost drugs in the pipeline and the affordability of gene- and cell-based therapies. (A February 2023 analysis by the Institute for Clinical and Economic Review suggested that a gene- or cell-based therapy, on average, costs between $1 million and $2 million per dose.)
Companies will continue to use tactics like prior authorization and approving a limited supply of a new medication for prescriptions, but for gene- and cell-based therapies “employers are pursuing other strategies to contain costs,” said Ellen Kelsay, CEO and president of Business Group on Health. Those include “indication and outcomes-based pricing and exploring alternative financing models, including value-based pricing.”
Not surprisingly, large employers continue to seek market-based drug reform, such as lower pricing from manufacturers, and “are also increasingly supportive of [government] policy interventions to address rising pharmacy costs,” Kelsay said.
A Fragmented System
To battle rising costs, employers said they would continue to focus on plan and patient affordability, focus more heavily on improved outcomes, lowered total cost of care, reduced unnecessary services, and prioritization of prevention and primary care, said BGH.
“The health-care delivery system in the U.S. is increasingly fragmented with providers, technology, and solutions that are not integrated [cohesively],” Kelsay told CFO in an email.
Employers continue to see transparency as a potential tool to contain costs and improve care quality, so they are investing in “health-care navigation and advocacy resources to assist employees in obtaining the right care, at the right time, in the right place, and by the highest quality provider possible,” said Kelsay.
Fewer large employers see virtual health care as transformative, with 64% indicating it would impact overall health-care delivery, down from 85% in 2021.
Large employers continue to focus on reducing unnecessary services and prioritizing prevention and primary care. “With the fragmentation of care delivery and lack of integration and cohesion across providers, systems, and solutions, there certainly remains concern regarding unnecessary care and even duplicative services,” Kelsay said.
The effects of the pandemic also displayed the need for preventive care. “During the pandemic, we saw that many preventive visits and routine screenings were postponed or skipped entirely,” said Kelsay. “Correspondingly, we’ve seen an uptick in chronic diseases and more later-stage diagnoses, underscoring the increased rigor on prevention and primary care.”
In other survey findings:
- About three-quarters (77%) of large employers reported increased employee mental health concerns. Over one-third (36%) are undertaking projects to expand access to mental health services in 2024.
- Fewer large employers see virtual health care as transformative, with 64% indicating it would impact overall health-care delivery, down from 85% in 2021. Employers indicated concerns with virtual health, including a lack of integration among solutions.
- One in two employers said cancer was still the number one driver of health-care costs, and 86% said it ranked among the top three, likely due to late-stage cancer diagnoses from the pandemic, BGH said. Last year, cancer overtook musculoskeletal conditions as the top driver of large companies’ health-care costs for the first time, said BGH.