Strategies for Employers to Keep Health Benefit Costs Down in 2021

Health care benefit plan sponsors face many unknowns in developing cost projections for 2021, but they expect to pay moderately more—4.4%, on average—to offer medical plans than what they spent this year, according to early results from Mercer’s National Survey of Employer-Sponsored Health Plans 2020.

“Different assumptions about cost for COVID-related care, including a possible vaccine, and whether people will continue to avoid care or catch up on delayed care are driving wide variations in cost projections for next year,” says Tracy Watts, a senior consultant with Mercer.

Willis Towers Watson, for instance, projected that increase to be higher: U.S. employers expect to pay around 7.3% more next year, its research finds.

Despite the uncertainty, the majority of employers are not cutting benefits, says Kim Buckey, vice president of client services at DirectPath. Rather, she says, employers plan to add or enhance existing benefits in response to employee concerns about their mental and financial health. One such benefit is telemedicine programs. “We’re seeing employers make adjustments to their telemedicine programs to make those offerings permanent—often combining coverage for ‘routine’ virtual visits from primary care doctors with discounted visits with preferred providers,” Buckey says.

She also notes a renewed interest in life insurance, critical illness coverage and hospital indemnity coverage, all of which, she says, give employees a greater sense of financial security.

Tracy Watts, senior partner and national leader for U.S. Health Policy at Mercer, recalls the positive impact telemedicine has had on employers and employees alike, especially during the first months of stay-at-home orders when few were visiting medical offices and hospitals. In Mercer’s report, virtual office visits and digital health care resources were the top benefits employers planned to add. “Any type of virtual or digital service or support for someone’s health care is a great place to start in terms of providing access in a cost-effective way without shifting or raising costs,” says Watts.

Ensuring that employees understand the benefits and programs their employer offers them can go a long way toward improving their appreciation and best use of those benefits, Buckey says. Health savings accounts (HSAs), health reimbursement arrangements (HRAs), flexible spending accounts (FSAs) and employee assistance programs (EAPs) are all examples of ways participants can reduce their own expenses. Employees who don’t take advantage of benefits or who use them improperly end up wasting their employer’s money. “Many employees are so focused on the benefit they’re using today that they’re just not aware of what else they can use to help reduce their own costs,” she observes.

Additionally, it’s critical for employees to recognize the value of shopping for their health care, Buckey says. Whether that is prescriptions, outpatient procedures or even surgery, shopping around can save money for both the employer and employee. For example, Mercer’s study found that prescription drugs are the biggest driver among all cost increases for employers. “Teach them how to ‘shop’ or where they can go for help; consider partnering with an advocacy and transparency firm to help with this,” Buckey recommends.

According to the Mercer survey, employers are also focusing on quality of care among health clinics and networks and helping employees and their family members select quality providers. The respondents also expressed interest in programs that the insurance companies offer and payment mechanisms that incentivize holistic care, says Watts.

As the U.S. prepares for a possible second wave of the coronavirus in the coming months that may drive up testing and treatment costs, most employers do not plan to shift expenses to participants. The Mercer report found only 18% said they would increase deductibles, co-pays or out-of-pocket maximums. Instead, as remote work continues, more organizations will discontinue benefits such as free snacks in the office and commuter/parking benefits, and increase child and elder care support, add more robust EAP offerings and even provide pet insurance, says Buckey.

For employers that have no choice but to consider a cut in benefits, Buckey advises speaking to a broker and/or consultant before doing so, as there may be more cost-effective options whereby the employer can retain a benefit offering. If cutting costs is an absolute necessity, she says, be open and honest with employees about the reasons for the change, the options that were considered, and what alternatives might be available. “While they might not like the outcome, they will remember and appreciate transparency.”