Study Highlights Newest Trends in Reducing Employer Health Benefit Costs

More midsize and large employers are foregoing the short-term savings offered by cost-shifting and turning to strategies addressing care delivery and health management, Mercer finds.

Following five years of relatively modest health care cost growth, more midsize and large employers are foregoing the short-term savings offered by cost-shifting and turning to strategies addressing care delivery and health management, according to the Mercer National Survey of Employer-Sponsored Health Plans 2018.

Employers continued to add telemedicine services (80%, up from 71%) and the average utilization rate for 2017 inched up to 8% of eligible employees from 7% the prior year. About half (51%) provide employees with an expert medical opinion service, which makes it easy for them to get a second opinion from a highly qualified specialist. 

Targeted programs that provide support for people with chronic conditions and other health issues (such as diabetes, infertility, and cancer) are offered by 56%. Enhanced care management programs, featuring medical professionals who provide support throughout the entire care episode and help resolve claims issues, are offered by 36% of employers.

Employers are also providing employees with access to Centers of Excellence (COE) for surgeries and a growing range of other complex treatments. Some steer employees to the COE with financial incentives or even by requiring they use it. This is most common with transplants (25%), bariatric care (14%), and oncology (10%). Among employers that steer employees to a COE and have evaluated performance, most have seen cost savings, better outcomes, and greater patient satisfaction. 

“These and other ‘future-focused’ strategies are making a difference for many employers,” says Tracy Watts, Mercer’s leader for health reform. “They may take more time to reduce medical costs than greater employee cost-sharing, but in the process they change how plans manage care, how providers are reimbursed, and even how people behave.”

In addition, employers are starting to ramp up efforts to detect and eliminate fraud, waste and abuse by health care providers. While most health plans provide some level of service to address fraud, waste and abuse, a small number of employers are purchasing enhanced services or going outside the health plan to a specialty vendor. So far, just 6% of all midsized and large employers (18% of those with 20,000 or more employees) have taken this step, but many more say they are considering it.

Promoting consumerism and a culture of health

For a second year in a row, the survey asked midsize and large employers to identify their most important health benefit strategies over the next five years. “Managing high cost claims” was at the top of the list, with 79% of employers rating it as very important or important.

“Creating a culture of health” was a close second, selected by 76% of employers, up from 70% last year—the biggest jump for any strategy. Actions employers are taking now to build a culture of health include providing healthy food choices in cafeterias and meetings (63%), prohibiting smoking on the work campus (57%), providing onsite fitness facilities (33%), offering resources to support financial health (54%), and a range of technology-based resources to engage employees in caring for their health and fitness (54%).

But a separate analysis conducted by Mercer suggests that one of the most important steps an employer can take is to include support for a healthy workplace culture in the company vision or mission statement, since this has a ripple effect throughout the organization. In 2018, 27% of all midsize and large employers have prioritized employee well-being in this way, up from 23% last year. And among the very largest employers (20,000 or more employees), 50% have, up from 43% last year. 

Sophisticated cost management strategies can be harder for smaller employers to implement, as they have fewer resources to devote to plan management and are more likely to be fully insured, with less flexibility than self-funded employers, Mercer says. Their go-to cost management approach tends to be giving employees more financial responsibility for health care spending. This may explain why, when faced with 2018’s big cost increases, many smaller employers moved to high-deductible consumer-directed health plans (CDHPs), which cost them 13% less, on average, than a traditional preferred-provider organization (PPO). CDHP prevalence jumped to 38% in 2018, up from 29% among employers of this size.

The prevalence of CDHPs among midsize and large employers, already high, grew more slowly, from 64% to 68%. While most employers of this size continue to provide these plans as an option, there was an increase in those offering it as the only plan available to employees at the largest worksite—13%, up from 10% in 2017. At the same time, employers moved to make these plans more affordable and attractive. Typically, CDHPs are offered with a tax-advantaged health savings account (HSA). More sponsors made contributions to employees’ accounts (82%, up from 77%) and the average individual contribution rose to $694 from $653, a 6.3% increase.

“Employers are very aware of the burden that high health care costs places on employees,” says Sharon Cunninghis, who leads Mercer’s health business in the U.S. “We’re helping them implement cost-saving strategies that don’t shift expense to employees and can actually improve affordability, access and outcomes.”

A link to pre-order Mercer’s report is available here.

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