Employers look to dodge cost-shifting in midst of rising expenses
More than half of employers plan to implement programs that will reduce total costs, a WTW survey finds.
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As the cost of healthcare in the U.S. continues to rise, many employers are rethinking their plan designs instead of passing the added expenses onto workers, found a report from global advisory and broking firm WTW.
WTW's 2024 Best Practices in Healthcare Survey found that U.S. employers project their healthcare costs will increase by 7.7% in 2025, compared with 6.9% in 2024 and 6.5% in 2023. As a result of this uptick in costs, employers are reaching beyond traditional cost-shifting strategies to improve healthcare affordability and employee health.
More than half of employers (52%) plan to implement programs that will reduce total costs, and just as many intend to adopt plan design and network strategies that steer to lower-cost, higher-quality providers and sites of care.
Only 34% expect to shift costs to employees through premium contributions, and just 20% will promote account-based health plans or high-deductible health plans, the report found.
WHAT'S THE IMPACT?
These initiatives are focused within the prescription drug space as well, with strong interest in alternative drug channels and pricing.
According to the survey, 21% of employers are planning for or considering promoting drug discount cards or direct-to-consumer prescription delivery to lower out-of-pocket costs in the next two years; 18% expect to allow members to purchase drugs through a retail or "cost plus" outlet; and 17% expect to have an acquisition cost pharmacy benefit manager contract structure.
Other proactive efforts to control costs over the next two years include taking vendor/health plans out to bid (43%), evaluating employee assistance programs/mental health programs (38%), and exploring narrow networks (30%) and centers of excellence (25%).
Plus, employers continue to explore new technology-enabled solutions for managing costs, with 54% exploring navigation or technology that shares provider price and quality information with members.
To support affordability and employee wellbeing, employers' top focus areas are obesity and weight management (40%), cancer and oncology (34%), cardiovascular health (28%) and women's health (27%).
Employers are still contending with the continued demand for high-cost weight loss medications, according to the report. While most are maintaining coverage for obesity medications with some restrictions, those who aren't currently offering coverage cite cost and safety as the biggest barriers.
Employers are also eager to consider safe and effective lower-cost alternatives: 48% expressed interest in compounded GLP-1 medications available through certain vendors at lower costs.
Among the survey's other findings, 73% of employers plan to carve out pharmacy benefits over the next few years to lower costs, and 27% would consider a smaller PBM that offers alternative pricing models.
Meanwhile, employers report the greatest opportunities for artificial intelligence in supporting health and benefits are navigation solutions (64%) and communication (58%).
THE LARGER TREND
An Aon report from August said the average cost of employer-sponsored healthcare coverage in the U.S. is expected to increase 9% next year, surpassing $16,000 per employee in 2025.
This projected increase, which assumes employers do not implement employee cost-sharing increases and other cost-saving strategies, is higher than the 6.4% increase to healthcare budgets that employers experienced from 2023 to 2024, after cost-saving strategies.
On average, the budgeted health plan cost for clients is $14,823 per employee in 2024.
ON THE RECORD
"The cost of healthcare has been rising steadily for years," said Tim Stawicki, chief actuary, Health and Benefits, WTW. "With cost increases reaching a post-pandemic high, companies are concerned about the burden it's putting on their workforces, especially since it affects decisions about insurance coverage and care. To tackle high prices and other causes driving increased spending, companies are pursuing initiatives that are beyond cost-shifting."
"To navigate the current healthcare environment, companies need to proactively address cost challenges and implement effective risk management strategies," said Courtney Stubblefield, managing director, Health and Benefits, WTW. "By doing so, they can mitigate financial risks, support the wellbeing of their workforce and achieve long-term sustainability."
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.
