Employee Healthcare Costs to Top $15K in 2020

Employers embracing new strategies to curb rising costs, including virtual care and pharmacy drug solutions.
By: | August 14, 2019

Healthcare costs are expected to top $15,000 per employee next year — an alarming development spurring employers to double down their efforts to thwart the increases.

That’s according to new research out Tuesday from the National Business Group on Health, which finds that U.S. healthcare benefit costs are projected to climb another 5% next year. Including premiums and out-of-pocket costs for employees and dependents, the total cost of healthcare is estimated at $14,642 per employee this year; that is projected to rise to an average of $15,375 in 2020. Employers will cover nearly 70% of costs, while employees will bear about 30%, or nearly $4,500, according to the group’s annual survey of nearly 150 of the nation’s largest employers.

“It’s alarming because it’s [growing] faster than wages, it’s higher than inflation, and it’s increasing at an unsustainable rate over time,” says Ellen Kelsey, NBGH chief strategy officer.

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In response, employers are setting their sights on a number of strategies to curb rising costs. These include offering more virtual care to employees, better managing high-cost claims and addressing the ongoing rise in the cost of prescription drugs. Still, those strategies are going further than just helping stem costs, Kelsey says.

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“Employers are making investments not just for the sake of health and managing healthcare costs but ultimately because they fundamentally believe it’s the right thing to do for the employees and their families, and it does have an impact on the overall organization,” she says.

More than half of employers (64%) say virtual care will play a “significant role” in how healthcare is delivered in the future, up from 52% who said so in last year’s survey. “This is the second year in a row where virtual solutions and implementing more of them has been the No. 1 priority for employers,” Kelsey says, adding that most hope virtual care will help address musculoskeletal and mental health issues.

The majority of respondents (51%) say they will offer more virtual care programs next year. Nearly all employers will offer telehealth services for minor, acute services, while 82% will offer virtual mental health services. That number could grow to 95% by 2022. Virtual care for musculoskeletal management shows the greatest potential for growth: While 23% will offer musculoskeletal management virtual services next year, another 38% are considering it by 2022.

The National Business Group on Health said 147 large employers representing an array of industries participated in the survey. These companies provide coverage to more than 15.6 million workers and their dependents.

Managing drug spend continues to be a high priority for employers, as more look to pass on drug discounts to workers. According to the survey, 20% will have a point-of-sale rebate program in 2020, and that number could triple to 60% by 2022. Two-thirds (67%) favor a model based on net price of medications with no rebate as an alternative.

See also: These groups are pushing Congress on surprise medical billing

But as drug prices continue to increase and with new therapies—like Novartis’ $2 million spinal muscular atrophy treatment Zolgensma—coming into the market with record-high prices, more employers say they would like the government to step in. For instance, three-quarters of employers say they would consider backing a plan where the government negotiates a price for all payers for drugs above $1 million, paid for out of a national fund. Meanwhile, nearly half would favor national funding to underwrite part of the cost for such drugs, and 35% would consider supporting shifting patients with certain high-cost conditions to Medicare.

“I think that’s a reflection of the frustration employers have,” says NBGH CEO and President Brian Marcotte.

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“When you think about a drug therapy that’s over $2 million per injection and you overlay that with what’s in the pipeline … the question for many employers is how can they financially fund for these solutions and is it even viable for their health plans over the long run?” Kelsey says.

Similarly, more employers seem open to expanding Medicare for those under 65. More than half of large employers say they support expanding Medicare to make more Americans under 65 eligible for the health insurance coverage.

Still, an overwhelming number don’t want a single-payer version—or “Medicare for All”—that uproots the healthcare system. Those findings come as Democrats running for the party’s 2020 presidential nomination have come out in support of expanding Medicare and building universal healthcare for Americans. While more than 70% of employers surveyed believe that universal healthcare would reduce the number of uninsured, they also say it would reduce the kind of health innovations that help lower costs. Four out of five employers also worry it will result in higher taxes.

“There are a lot of questions around Medicare for All,” Marcotte says. “It’s not so much an issue of employers dismissing it outright; it’s more [that] there are too many unanswered issues on the table for it to be a reasonable consideration at this point.”

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Kathryn Mayer is HRE’s benefits editor and chair of the Health & Benefits Leadership Conference. She has covered benefits for the better part of a decade, and her stories have won multiple awards, including a Jesse H. Neal Award and honors from the American Society of Business Publication Editors and the National Federation of Press Women. She holds bachelor’s and master’s degrees from the University of Denver. She can be reached at [email protected]