The headline news from Mercer’s just-released 2017 survey is encouraging: Employers held total health benefit per-employee cost growth to just 2.6% in 2017. In fact, for the past five years, annual cost growth has averaged just over 3% annually, compared to just over 6% annually for the prior 5-year period.
This downshift to slower cost growth has taken a lot of hard work by a lot of employers. One focus has been consumerism. Employers have both shifted financial responsibility to employees and provided ever-improving tools to help them manage it successfully. Price transparency tools are now provided by more than 8 out of 10 large employers (500 or more employees), and telemedicine services are offered by 71% (up sharply from 59% last year) – to name just two of the ways employers are helping employees become smarter healthcare shoppers. One change we didn’t see in 2017 was shift to “full replacement” strategies for high-deductible, consumer-directed health plans. Most employers continue to offer these plans as a choice, rather than as the only medical plan available to employees.
More recently, employers are exploring ways to manage costs that aren’t easily “shoppable” – the high-cost claims generated by members with serious medical conditions. As Mercer’s Sharon Cunninghis states, “We’re helping employers gain ground on some of their biggest cost drivers by such means as addressing chronic conditions with enhanced care management and targeting double-digit spending growth on specialty drugs with a suite of pharmacy solutions. When you reduce cost by improving quality, that’s a win-win.”
It’s important to note that behind 2017’s 2.6% average increase, actual cost experience varied widely. While about a fourth of employers reported no change in cost or a decrease in 2017, about a third saw cost grow by more than 10%. Skyrocketing cost for specialty drugs is a big concern that is only getting bigger with hundreds of new drugs in development. Employers predict cost to rise by more than 4% in 2018 – still moderate, but higher than in recent years. In addition, the threat of the excise tax remains a dark cloud over planning for 2020.
Employers are learning that while consumerism has an important role in managing cost, it’s a piece of a larger puzzle. The future of managing health costs is beyond simple plan design. The survey results show that employers are looking to change the fundamentals: provider pay that reflects efficient, quality outcomes; new options for receiving care; high-tech, high-touch member advocacy; driving quality improvement; personalizing their employees’ choices. Innovative change is happening now and should only pick up speed as we head into 2018.
Check for more highlights from Mercer’s National Survey of Employer-Sponsored Health Plans 2017