post image

Health Benefit Costs Rise Again, But Something Else May Be Driving Plan Decisions


The conclusions of health benefits analysts are consistent: After a dip in 2020, health benefit costs are rising again, and trends are returning to pre-pandemic levels.

That’s not the whole story, however. Something else has grown to such importance that, for many employers, it has become the imperative in defining their employee benefit plans in the post-pandemic era: taking better care of employees and their concerns.

For employers seeking a way forward, high-touch, personalized care management may be part of the solution.

Health Benefits Costs Returning to Higher Trends

In its 2021 Employer Health Benefits Survey, Kaiser Family Foundation found annual premiums for employer-sponsored coverage in 2021 are up 4 percent over 2020.

Mercer projects a 4.7 percent health plan cost increase for 2022.

Willis Towers Watson’s survey projects a 5.2 percent increase in health benefit costs in 2022.

Segal projects employer health plan costs returning to pre-pandemic levels in the range of 5 – 7 percent in 2022, and specifically for open-access PPO plans, increases of 7.3 percent. Increased utilization and more use of specialty drugs are major cost drivers, Segal found.

The various surveys’ results are mostly reflecting PPO experience, as the majority of large employers are in PPO coverage arrangements, the lesser managed alternative to the more restrictive HMOs. As such, there is less control over costs.

Regardless of the group size and type of health benefit plan, employers see roughly the same cost profile: approximately 80 percent of the total health benefit cost is driven by roughly 20 percent of the population. The majority of plan members don’t require much care, and thus won’t drive much of the cost. The PPO model suits them—choice and flexibility, and care access for the few times they need it.

But the PPO arrangement leaves the group exposed to potentially higher costs, given the lesser cost control. That is, unless the group applies effective care management where it is needed, as Milliman observed in its 2021 Milliman Medical Index.

According to Milliman, effective care management is key to employers controlling their healthcare costs in 2021 and beyond. In its 2020 Medical Index, Milliman said its research indicated effective use of care management principles could reduce overall healthcare costs by upwards of 25 percent. 

“Care management” can include dozens of plan features and programs. Various plan designs that share greater risk and cost with plan participants remain common strategies. But in this new era, according to some of the surveys cited above, employers may be pausing from increased cost-sharing strategies for the sake of employee relations.

Care Management for the Sake of Employee Wellbeing

According to Willis, employers are using or planning to use various management strategies to contain or improve health benefit costs, including narrow networks, concierge services, centers of excellence, telebehavioral health, onsite health promotions, medication adherence programs and evaluation of specialty drugs.

According to Mercer, more employers are continuing last year’s trend of avoiding cost-cutting strategies that shift more costs to employees. Said Mercer in its recent report, only 38 percent of employers are implementing cost-savings measures in 2022 that shift costs to employees, down from 47 percent in 2021. Instead, more employers are looking to remove cost barriers, such as through increased telemedicine and virtual access to mental health benefits, according to Mercer.

According to a Willis Towers Watson report, more employers are leveraging resources to “enhance the employee experience across physical, financial, emotional and social wellbeing.” The increased efforts are seen as a response to employee physical and mental fatigue after the challenges of the past year of pandemic-related shutdowns, isolation, illness and stress.

In addition to expansion of access through virtual care, some employers are taking a more high-touch approach in helping employees address health concerns, such as hypertension, diabetes and other chronic conditions. A couple of large employers, for example, engaged Curally to provide personalized care management and coaching to plan participants with higher health risks and chronic conditions. As a result, improved patient compliance and targeted care interventions produced double digit cost savings, as suggested by Milliman.

Such successes are likely to get more attention, especially as more health plan participants experience improved quality of life to go along with reductions in cost. These are outcomes that can solidify the imperative to “take better care of employees” throughout the pandemic and beyond.