How to Control Increasing Employee-Benefits Costs
Healthcare costs are rising, and that means one thing for employers: more expensive employee benefits.
Healthcare costs are rising, and that means one thing for employers: more expensive employee benefits. In fact, an August survey of 133 large U.S. employers by the National Business Group on Health (NBGH) found that employers surveyed expected health-plan premiums to rise in 2017 by 5 percent.
Still, many of those employers are optimistic that they can lower that increase by making changes to their plans. Those changes will target the top factors expected to raise the cost of benefits and will ultimately help make health care more affordable for everyone.
Here’s a look at the top cost drivers and how employers plan to control them:
Specialty pharmacy benefits
Prescription drugs are driving increases in costs associated with employee benefits. According to a March 2016 report from Express Scripts, the prices of these drugs are expected to increase 7.3 percent in 2017. Spending on specialty drugs has been deemed the most influential factor of these high prices, and the same report expects those costs to rise 16.8 percent in 2017.
Employers agree that specialty medications have a huge impact on healthcare costs. Among those surveyed by the NBGH, 80 percent listed specialty pharmacy benefits among the top three cost drivers, while 31 percent rated them number one.
Controlling costs: To control specialty drug costs, consider pharmacy-management techniques. The goal is to have employees make the most efficient decisions when it comes to medication, and 68 percent of the surveyed employers planned to give the strategy a try.
For general medications, practices here can include requiring prior authorization before filling a prescription and using quantity limits or step therapy to encourage employees to try less expensive drugs, first.
There are specific strategies for specialty drugs, as well. For instance, 68 percent of employers said they will require specialty medications to be obtained from a specialty pharmacy, a facility that carries only this kind of drug. Partnering with specialty pharmacies not only helps control employee-benefit costs, but also connects employees with specialty pharmacists who can help them better manage their condition and medications.
In the NBGH survey, the next biggest influencer was high-cost claimants. The American Health Policy Institute (AHPI) defines a high-cost claimant as a patient who costs $50,000 or more annually, and 74 percent of respondents rated this issue among the top three drivers of employee-benefit costs.
In the AHPI’s recent analysis of claims data from 26 large employers, it found that the average high-cost claimant costs $122,382 each year -- 29.3 times the cost of the average member. While these expenses account for 31 percent of healthcare spending among the employers surveyed, these individuals made up just 1.2 percent of all members.
Controlling costs: Offering consumer-driven health plans (CDHP) and health savings accounts (HSA) puts employees in the driver’s seat and makes costs more manageable for everyone. CDHPs make employees responsible for a greater amount of their initial healthcare costs. In other words, employers manage less of the insurance cost.
But these plans are beneficial for employees, as well. Employees pay lower monthly premiums, and can prepare for future costs by saving money tax-free with HSAs. HSAs are similar to flexible spending accounts, but employes keep the money they save even if they change jobs or retire. HSAs can help employees meet the deductible for medical expenses and can lead to considerable pre-tax savings -- especially when employers contribute to those accounts.
That’s why more employers will offer CDHPs and HSAs in 2017, the NBGH report found. Thirty-five percent of employers will offer only CDHPs -- up from 33 percent in 2016 -- and the number of employers offering HSAs will increase from 87 percent to 92 percent next year.
Diseases and conditions
Employers surveyed by NBGH also rated a different aspect of costly claims among the top three drivers of employee benefits costs: high-cost diseases and conditions. In fact, the AHPI analysis found that 53 percent of the healthcare costs for high-cost claimants are for chronic conditions, while 47 percent are for acute conditions.
Controlling costs: To control the costs of diseases, employers are going to the source. NBGH found that 80 percent of the employers surveyed planned to offer nurse-coaching for care and condition management, while 72 percent will offer nurse-coaching for lifestyle management.
Nurse-coaching and other wellness programs help employees manage their conditions. Programs help workers with everything from taking their medications correctly and consistently to following a proper diet and exercise regimen for their condition. They also make sure employees meet with doctors regularly and take other steps to keep the condition under control.
Employers are further turning to telehealth as a low-cost option of condition management. Telehealth provides employees communication with a health provider without their having to travel to a doctor’s office. These services may be especially useful in treating mental health conditions, such as depression, and benefit both the employee and employer. Employees gain convenient counseling services, while employers save on costs.
Among large employers surveyed by NGBH, 90 percent will make telehealth services available to employees, in states where they are allowed, in 2017, up from 70 percent this year and 46 percent in 2015.