Employers Become Activists as Healthcare Costs Rise

A new survey finds employers are looking for novel solutions to keep costs down.
By: | August 7, 2018 • 2 min read
healthcare costs

Employers are increasingly looking for novel ways to contain the rising costs of providing employees with healthcare—which is expected to approach $15,000 annually—according to a new survey.

The Large Employers’ 2019 Health Care Strategy and Plan Design Survey found employers project the total cost of providing medical and pharmacy benefits will rise by 5 percent for the sixth consecutive year in 2019. Including premiums and out-of-pocket costs for employees and dependents, the total cost of healthcare is estimated to be $14,099 per employee this year, and projected to rise to an average of $14,800 in 2019. Employers will cover roughly 70 percent of those costs while employees will bear the balance. Employers cited high cost claims, specialty pharmacy and specific diseases as key drivers of cost increases.

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(The survey was conducted between May and June 2018 and a total of 170 large employers participated. Collectively, respondents represent a wide range of industry sectors and offer coverage to more than 19 million employees and their dependents. More than 60 percent of respondents belong to the Fortune 500 and 53 belong to the Fortune 100.)

“Healthcare cost increases continue to outpace workers’ earnings and increases in inflation, making this trend unaffordable and unsustainable over the long term,” said Brian Marcotte, President and 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.”

Indeed, nearly half of respondents (49 percent) are either driving changes in the delivery system directly or through their health plan, leveraging digital solutions or both. For example, 35 percent are implementing alternative payment and delivery models such as Accountable Care Organizations and high-performance networks either directly or through their health plan. Direct contracting with health systems and providers is expanding, from 3 percent in 2018 to 11 percent in 2019.  Direct contracting between employers and Centers of Excellence is also rising sharply, from 12 percent this year to 18 percent next year.  Cancer, cardiovascular and fertility COEs are experiencing the greatest growth.

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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 percent this year to 30 percent in 2019, the first time in four years fewer employers will offer these plans.

According to the survey, more than half of employers (52 percent) believe virtual care will play a significant role in how healthcare is delivered in the future, while 43 percent believe artificial intelligence will play a major role. In fact, half of employers (51 percent) identified implementing more virtual care solutions (which includes include digital coaching, condition management, remote monitoring, physical therapy and cognitive behavioral therapy) as their top healthcare initiative in 2019.

“The growth in virtual solutions largely reflects employer frustration with the pace of change in how healthcare is delivered,” said Marcotte. “Interestingly, seven in 10 employers believe new market entrants from outside the healthcare industry are needed to disrupt health care in a positive way.  These disruptors include innovators from Silicon Valley and elsewhere, and employer coalitions.”

Web Editor Michael J. O’Brien has been with HRE for more than a decade and holds a degree in economics from Boston College. He can be reached at [email protected]

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