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Business Survey: Large U.S. Employers Project Health Care Benefit Costs to Surpass $14,000 per Employee in 2018

Washington, DC, August 10, 2017 — Faced with another 5 percent increase in health care 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.

As a result, more employees will have access to broader health care services, including telemedicine, Centers of Excellence and onsite health centers during open enrollment while not experiencing major increases in their costs.

“The Large Employers’ 2018 Health Care Strategy and Plan Design Survey” found employers project the total cost of providing medical and pharmacy benefits to rise 5 percent for the fifth consecutive year in 2018.

Including premiums and out-of-pocket costs for employees and dependents, the total cost of health care is estimated to be $13,482 per employee this year, and projected to rise to an average of $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.

Specialty pharmacy costs are likely to remain a top concern as new high-priced drugs come on the market.

“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.

“While employers continue to address costs through health care management and plan design efforts, they are also ramping up efforts to positively affect the supply side of the health care system by pursuing health care payment and delivery reform initiatives.”

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

  • Telehealth utilization surging: Virtually all employers (96 percent) will 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 (ACOs) could double by 2020: 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 health care quality beyond what the system does today, compared to reducing costs.
  • More employers opening health centers: More than half of employers (54 percent) will offer onsite or near site health centers in 2018 and that number could increase to nearly two-thirds by 2020. These centers have a positive impact on business performance metrics, because they often result in decreased absenteeism and improved presenteeism.
  • Centers of Excellence (COEs) embracing bundled payment arrangements: 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 COEs contracts, depending on the medical procedure or condition.
  • Growing interest in 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 vs. 16 percent in 2017).

“One of the most interesting findings from the survey is that employers are focused on enhancing the employee experience,” Marcotte said.

“For example, there is a big increase in the number of employers offering decision support, concierge services and tools to help employees navigate the health care system. The complexity of the system and proliferation of new entrants has made it difficult for employees to fully understand their benefit programs, treatment options and where to go for care,” said Marcotte.

According to the survey, 66 percent of companies will offer medical decision support and second opinion services in 2018, an increase of 47 percent from this year. Additionally, the number of companies offering high-touch concierge services will jump from 28 percent this year to 36 percent in 2018.

Among other survey findings:

  • Nine in ten employers (90 percent) will offer at least one Consumer Directed Health Plan (CDHP) in 2018. In addition, nearly 40 percent of employers will offer a CDHP as the only plan option in 2018, compared with 35 percent this year.
  • The most common CDHP design is a high-deductible health plan (HDHP) paired with a Health Savings Account, offered by 80 percent of employers with any type of CDHP. About a quarter of employers (28 percent) pair a HDHP with a Health Reimbursement Arrangement.
  • To help control surging specialty pharmacy costs, 44 percent of employers will have site of care management tactics in place in 2018, a 47 percent increase over this year. Seven in ten employers will use more aggressive utilization management protocols.

Marcotte continued, “As employers look ahead, we expect them to increasingly focus on value purchasing opportunities within the delivery system and improving the experience for health care consumers. Finding solutions to the growing challenge of skyrocketing specialty pharmacy costs will also remain a top priority.”

About the Survey

The Large Employers’ 2018 Health Care Strategy and Plan Design Survey was conducted between May and June 2017.

A total of 148 large employers participated in the survey. Collectively, respondents represent a wide range of industry sectors 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.

About the National Business Group on Health®

The National Business Group on Health is the nation’s only non-profit organization devoted exclusively to representing large employers’ perspective on national health policy issues and helping companies optimize business performance through health improvement, innovation and health care management.

The Business Group’s mission is to keep its membership on the leading edge of innovation, thinking and action to address health care cost and the delivery, financing, affordability and consumer experience with the health care system.  Business Group members, which include 73 Fortune 100 companies, provide health coverage for more than 50 million U.S. workers, retirees and their families.

For more information, visit www.businessgrouphealth.org.