What to Do About Rising Healthcare Costs?

Business leaders have some ideas

Faced with an expected 5 percent increase in healthcare benefit costs, a growing number of large U.S. employers plan to focus more on how health care is delivered and paid for while still pursuing traditional methods of controlling costs, such as cost-sharing and plan design changes, according to an annual survey by the National Business Group on Health.

A total of 148 large employers participated in the “Large Employers’ 2018 Health Care Strategy and Plan Design Survey” between May and June 2017. Collectively, they represent a wide range of industries and offer coverage to more than 15 million employees and their dependents. Two-thirds of respondents belong to the Fortune 500 and/or the Global Fortune 500, and 42 belong to the Fortune 100.

Including premiums and out-of-pocket costs for employees and dependents, employers estimate the total cost of healthcare will average $13,482 per employee this year, and $14,156 in 2018. Employers will cover nearly 70 percent of those costs while employees will bear about 30 percent, or nearly $4,400 in 2018. For the second consecutive year, employers ranked specialty pharmacy (26 percent) as the top driver. Eight in ten employers ranked it among the top three cost drivers.

“Employers are recognizing that traditional cost control techniques alone aren’t able to reduce costs to the point where they are no longer a drain on the bottom line,” said Brian Marcotte, president and CEO of the National Business Group on Health.

According to the survey, an increasing number of employers plan to adopt the following strategies:

• Virtually all employers (96 percent) said they would make telehealth services available in states where it is allowed next year. More than half (56 percent) plan to offer telehealth for behavioral health services, more than double the percentage this year. Telehealth utilization is on the rise, with nearly 20 percent of employers experiencing employee utilization rates of 8 percent or higher.

• Accountable Care Organizations. Twenty-one percent of employers plan to promote ACOs in 2018, but that number could double by 2020, as another 26 percent are considering offering them. Employers are slightly more confident about the ability of ACOs to improve healthcare quality beyond what the system does today, compared to reducing costs.

• Onsite health centers. More than half of employers (54 percent) said they would offer onsite or near-site health centers in 2018, and that number could increase to nearly two-thirds by 2020. These centers are said to often result in decreased absenteeism.

• Centers of Excellence. Almost nine in ten employers (88 percent) expect to use COEs in 2018 for certain procedures, such as transplants or orthopedic surgery. Bundled payments or other types of alternative payment arrangements will be used by 21-48 percent of COE contracts, depending on the medical procedure or condition.

• Value-based benefit design. Nearly 40 percent of employers have incorporated some type of value-based benefit design in which employees receive reduced cost sharing or premium reductions when they take steps to manage chronic conditions or obtain higher-quality or more efficient care. There has been some increase in the use of value-based benefit design to steer employees toward telehealth (18 percent in 2018 versus 16 percent in 2017).