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Healthcare costs projected to rise 5% in 2020 as employers look to control costs

Despite this cost increase, 95% of employers are very confident their organization will continue to sponsor healthcare benefits to active employees.

Jeff Lagasse, Associate Editor

Curbing the cost of healthcare and increasing its affordability remain the top priorities for 93% of employers over the next three years, according to the 24th annual Best Practices in Health Care Employer Survey by Willis Towers Watson.

Despite that, however, nearly two in three employers see healthcare affordability as the most difficult challenge to tackle over that same period.

Employers expect healthcare cost increases of 4.9% in 2020 compared with 4% in 2019. Despite this cost increase, 95% of employers are very confident their organization will continue to sponsor healthcare benefits to active employees in five years. Moreover, employers' longer-term commitment to sponsoring these benefits 10 years from now hit 74%, the highest level in the past decade.

The rising cost of healthcare puts financial pressure not only on employers, but also their employees. In fact, 89% of employers believe rising healthcare costs are a significant source of financial stress for their employees.

WHAT'S THE IMPACT

While it's important for employers to approach their benefit strategy holistically, the survey revealed some key cost-saving measures employers may want to consider.

Firstly, one of the main drivers of growing affordability concerns among both employers and employees is pharmaceutical spending -- notably, the increased cost and continued inflation of specialty pharmaceuticals. More employers have been adopting comprehensive solutions, including roughly half of employers evaluating and managing specialty pharmacy spend not only through the Rx benefit, but also exploring opportunities through the medical benefit (projected to grow from 49% today to 85% by 2020).

A couple of strategies have started to emerge among employers. More of them are attempting to offset specialty pharmaceutical costs by influencing the site of care -- as the location where care is given can dramatically affect prices. In fact the number of employers that say they plan to implement coverage changes to influence site of care for specialty pharmaceuticals dispensed through the medical benefit over the next few years is more than doubling -- from 21% today to 55% by 2021.

Also, a growing number of employers are intrigued by the possibility of biosimilars offering a lower cost option for patients in need of expensive specialty products. That's why 30% of employers have ensured they have appropriate formulary strategies to leverage biosimilars when available, with another 39% planning to take a more active approach in the next two years.

Another emergent strategy is that more employers continue to make stepwise changes in implementing value-based designs to manage costs year over year, while also driving better health outcomes for their employees. With employees financially strained by the cost of healthcare, employers see an opportunity to steer their staff toward the highest quality affordable healthcare.

There's a subset of employers diving deeper into new strategies that could help improve access to care beyond the approaches of high-performance networks (growing from 16% to 52% adoption by 2021) and the use of centers of excellence within the health plans (growing from 45% to 74% by 2021), which are reaching a critical mass of employers.

By applying design features or incentives, employers are nudging their employees toward higher value, appropriate care that is sourced efficiently and away from overused, potentially wasteful services. For instance, the proportion of employers slashing out-of-pocket costs to steer employees toward proven services that produce positive health outcomes at a lower price tag will nearly triple over next few years -- from 17% today to 46% by 2021.

Also, employers are increasing the out-of-pocket costs for commonly overused and sometimes unnecessary services; adoption of this strategy stands to more than quadruple over the next few years, from 7% today to 35% by 2021.

Employers are also actively reviewing out-of-network coverage and costs. The number of companies reducing out-of-network reimbursements, eliminating non-emergency out-of-network coverage or negotiating full disclosure of all related administrative costs could more than double by 2021.

WHAT ELSE YOU SHOULD KNOW

As employers look to cut costs while enhancing their population's wellbeing, mental and behavioral health ranked the highest as the top clinical area of focus over the next three years, selected by two in three employers.

The majority of employers are working to build full-blown strategies for a holistic solution to emotional health by redesigning their employee assistance programs to better address emotional and financial wellbeing -- expected to jump from 33% to 74% in three years -- and building an organization-wide behavioral health action plan (leaping from 25% to 68% in three years).

Stress management strategies are now coming to the fore. The number of employers that are measuring the stress level of their employees is on track to triple by 2021, from 16% to 53%. And building on the 27% of employers that already offer apps to support sleep and relaxation, more than half will implement these programs by 2021 in order to enhance their employee emotional wellbeing. By addressing stress and anxiety before it becomes an expensive clinical need in their population, employers are making a small financial investment to keep costs low down the road.

THE LARGER TREND

More than 80% of employers said they are planning to increase their health and wellness budgets this year, more than double compared to 2009 (34%), according to the 10th annual Optum Wellness in the Workplace study released in August.

Employers are increasingly embracing digital technology to engage workers in health and well-being programs. Since 2016, the proportion of employers using health-related mobile apps rose by 46%, with now close to three-quarters of respondents reporting that the apps helped increase employee participation.

Also, the number of employers reporting that their employee wellness programs include the use of fitness or activity devices increased by nearly 40% over the same time period, with 71% of employers reporting successful engagement by their employees.
 

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com

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