How employers hope to contain rising healthcare costs

Organizations expect their healthcare costs to increase 5.2% in 2022, Willis Towers Watson finds.
By: | October 8, 2021

Employers expect their healthcare costs to increase 5.2% in 2022—a sharp increase from the small rise last year and one that is causing them to more aggressively consider healthcare cost management strategies, according to new research from Willis Towers Watson.

Including premiums, the total average employer cost for medical and pharmacy benefits per employee is expected to rise to an estimated $13,360 from $12,501 in 2020, the consulting firm’s survey finds. Employee contributions for premiums will increase slightly, to $3,331 from $3,269 in 2020.

The increase is slightly lower than the 5.5% increase that employers projected for 2021 but much higher than the actual 2.1% increase in 2020. Last year’s increase was the smallest in decades and is considered an anomaly because many employees deferred non-emergency care and rapidly embraced telemedicine during the pandemic.

Rising costs, coupled with increased healthcare use fueled by a resurgence in deferred care, are “driving employers to find new ways to control costs while providing employees with affordable, high-quality care,” says Julie Stone, managing director, health and benefits, Willis Towers Watson.

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U.S. employers are prioritizing healthcare affordability and employee wellbeing over the next two years as health benefit costs rise, Willis Towers Watson finds. Ninety percent of the 378 U.S. employers surveyed—together employing roughly 5.9 million workers—say achieving affordable and sustainable costs for the organization is a key priority, while 86% say affordable costs for employees—especially lower-wage employees—is a priority, according to the survey.

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So, how exactly are employers trying to hold down their costs? A quarter of employers say they include surcharges for covering a working spouse, while another 9% are planning to roll out similar programs or are considering them in the next two years. And 22% currently structure employee contributions based on pay levels or job grades, with another 8% planning or considering doing so in the next two years.

The survey found that other popular strategies include using:

  • centers of excellence (48% use centers of excellence within their health plans, with another 23% planning or considering adding them),
  • narrow networks (21% currently offer a narrow network of higher-quality and/or lower-cost providers, with another 30% planning or considering the approach) and
  • concierge services (31% offer access to concierge services with integrated care management programs, and 25% are planning or considering doing so).

Also popular are telebehavioral health (89% offer coverage for these services, while 7% are planning or considering it) and on-site health promotion activities (55% offer on-site/worksite health promotion activities, with 17% planning or considering it).

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At the same time that they are trying to hold down growing healthcare costs, the vast majority of employers (85%) also are focusing on enhancing employee wellbeing—a key priority that comes as employee physical and mental health has taken a hard hit from the pandemic. Nearly half of employers (45%) say they are leveraging wellbeing vendors to help enhance the employee experience across physical, financial, emotional and social wellbeing; another 37% are planning or considering doing so in the next two years. Additionally, 52% are enhancing the enrollment experience, with 34% planning or considering doing so. And, 49% are adding more choices in all benefits; another 23% are planning or considering doing so.

“Those employers that take action to keep their healthcare benefits affordable and easily accessible, strengthen the wellbeing of their workers and build a better employee experience will gain advantages in the future—namely, a more healthy, satisfied and productive workforce,” says Jeff Levin-Scherz, M.D., population health leader, Willis Towers Watson.

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 kmayer@lrp.com.

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