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This year’s results highlight three important trends in employer health program management: balancing affordability and choice, creating a culture of health, and moving from cost-shifting to future-focused strategies. The good news is that health benefits cost rose by a moderate 3.6% in 2018 and is expected to rise by about 4% again in 2019. The bad news is, that’s faster growth than in 2017, and benefits cost is still outpacing inflation and workers’ earnings growth. Prescription drugs – specialty drugs in particular – remain a top cost driver.
Smaller employers are having a tougher time controlling cost. Organizations with 10-499 employees were hit with an average increase of 5.4%, while midsize and large employers held cost growth to 3.2%. These larger employers have been making investments to address underlying issues with care delivery -- and survey results suggest it’s working. They’ve taken steps to reduce specialty drug spending and added telemedicine services, Centers of Excellence, technology-based health resources and enhanced care management. These and other future-focused strategies move away from shifting cost to employees toward improving affordability, access, and outcomes. They may take more time to reduce costs than greater employee cost-sharing, but they fundamentally change how plans manage care, how providers are reimbursed, and how people care for their own health.
MODERATE HEALTH BENEFIT COST GROWTH CONTINUES
- Average total health benefit cost per employee rose 3.6% in 2018
- Among small employers (those with 10-499 employees), cost rose by 5.4% on average
- While health benefit cost growth is moderate, it is outpacing workers’ earnings and inflation
AVERAGE PER-EMPLOYEE COST TOPS $13,000 FOR MIDSIZED AND LARGE EMPLOYERS
- Small employers were hit with a 5.4% increase in 2018.
- In addition to having fewer resources to devote to plan management, small employers are more likely to be fully insured, with less flexibility than self-funded employers.
- Midsized and large employers (those with 500 or more employees) held cost growth to 3.2%
A THIRD OF COVERED EMPLOYEES ARE NOW IN LOW-COST CDHPS
- After a slow-down last year, CDHP enrollment rose from 30% to 33% this year, with especially strong growth among small employers.
- While small employers have moved more slowly than larger employers to adopt high-deductible consumer-directed health plans, in 2018 offerings of these plans among employers with 10-499 employees jumped from 29% to 38%, and enrollment rose from 22% to 28%.
- Offerings of CDHPs among midsized and large employers, already high, grew more slowly, from 64% to 68%, and enrollment rose from 34% of covered employees to 37%.
Facing big cost increases, smaller employers raised PPO deductibles and added consumer-directed health plans, while midsized and large employers refined consumerism strategies.
Average PPO Deductible for Individual, in-network Coverage
Average Deductible Tops $2,000 Among Small Employers
- Midsized and large employers slowed the pace of cost-shifting to employees
- The average individual PPO deductible for midsized and large employers rose by less than 2%, to reach $982
- Small employers, facing bigger cost increases, raised the average individual PPO deductible by more than 5% to top $2,000
Following five years of relatively modest cost growth, more midsized and large employers are foregoing the short-term savings offered by cost-shifting and turning to strategies addressing care delivery and health management.
GROWTH IN OFFERINGS OF TELEMEDICINE SERVICES CONTINUES
- As employers continue to add telemedicine services, the average employee utilization rate is rising – but slowly.
- Most midsized and large employers offer telemedicine services through their health plan, but 16% use a specialty vendor outside the health plan.
- Among these employers, on average, 8% of eligible employees used telemedicine at least once last year, compared to 7% the prior year.
Employers are providing access to Centers of Excellence for transplants, surgeries, and other complex treatments.
- Some midsized and large employers steer employees to the COE with financial incentives or even by requiring they use it.
- Incentives are most common with transplants (25%), bariatric care (14%), and oncology (10%).
- Among employers that steer employees to one or more COEs and have evaluated performance, nearly all have seen cost savings, better outcomes, and greater patient satisfaction.
CDHP "FULL-REPLACEMENT" STRATEGY
- More midsized and large employers offered a CDHP as the only type of plan offered at the largest worksite in 2018 (13%, up from 10%)
- Most employers still offer the CDHP as an option – and those that are offered as full replacement plans tend to be more generous. For example, employers are more likely to offer a contribution and the average contribution amount is higher -- $737 in full-replacement plans compared to $679 in plans that are offered as an option
Employers’ strategic priorities for the next five years
- When asked to identify the strategies that will be the most important for the next five years, midsized and large employers placed “managing high-cost claimants” and “creating a culture of health” at the top of the list.
- “Creating a culture of health” moved up a place in 2018 – in 2017 it was ranked third.
- Behavioral health strategies were rated as important by 47% of employers
2017 Mercer National Survey of Employer-Sponsored Health Plans
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