Employer health insurance cost growth cut in half
Employer-sponsored health insurance costs have increased about 3% annually since 2012 after a decade of 6% or more yearly increases, according to Mercer’s new National Survey of Employer-sponsored Health Plans.
Factors cited include preemptive moves by employers to avoid the Affordable Care Act’s excise tax on high-cost plans, cost-shifting and consumerism, such as the rise of high-deductible plans.
Despite those cost controls, smaller employers are facing higher increases. The report found that 34% of smaller employers, defined as having between 10 and 499 employees, saw health insurance cost increases of more than 10% in 2017.
With more market leverage and resources to target costs, larger employers can control costs more easily.
That said, despite the added influence over costs, nearly one-fifth of employers with 500 or more employees and 11% of businesses with 20,000 or more workers saw health plan cost increases of more than 10% last year.
The report predicted added cost pressures in the coming years. Cost-drivers include medical advances, technology, high utilization, an aging population and the expected increase of uninsured Americans, according to the report.
The uninsured rate has dropped since the ACA, but the numbers have moved back in the other direction over the past year. Mercer warned that more uninsured will mean more uncompensated care and those costs will wind up getting passed onto employer plans.
Another issue that employers face is that there aren't many cost-shifting levers left. Businesses have pushed more out-of-pocket costs onto consumers. That movement has led to PPO deductibles rising by about 9% annually since 2012 among mid-sized and large employers to $966 in 2017. Small employers have increased deductibles annually by 6% to an average of $1,917 in 2017.
Employers, particularly large and mid-sized companies, have pushed employees to consumer-directed plans that often have a health savings account. Those plans had a minimum deductible of $1,300 in 2017.
With those kinds of deductibles, members are struggling to afford healthcare, and employers can’t shift many more costs onto them. This will mean employers need to find other ways to cut costs.
One potential area of savings is prescription drugs, including specialty drugs. Annual spending on specialty drugs nearly doubled between 2011 and 2015. Mercer said that will get worse as new drugs enter the market over the next few years. In response, more than half of employers are steering workers to specialty pharmacies.
Another avenue tried by large and mid-sized companies are Centers of Excellence (COE) for orthopedics, cardiology and oncology. The report said 41% of businesses surveyed offer COE for women’s health, such as infertility and pregnancy.
Mercer said businesses use the centers because of better outcomes and cost. In many cases, this allows employers to contract directly with high-quality rated providers, who are willing to maintain a level of value-based care.
Suzanne Delbanco, executive director of Catalyst for Payment Reform, a nonprofit that works with more than 30 employers and purchasers of healthcare, recently told Healthcare Dive: “The interest in direct contracting is not a coincidence. It’s one of the few strategies that employers can use.”
Meanwhile, Mercer found most employers aren’t using accountable care organizations or narrow network strategies. Fewer than 10% of businesses are trying those strategies.
Employers told Mercer that they plan to implement other cost-saving strategies over the next five years, including monitoring/managing high-cost claimants, better managing cost for specialty pharmacy and focusing on creating a culture of health.