How Employers Plan to Tame the Health Cost Rebound

The deferral of non-essential health care by Americans during the COVID-19 pandemic lowered costs for employers, but the rate of people accessing health care and the costs that come with that are expected to pick back up.

According to the Business Group on Health’s “2022 Large Employers’ Health Care Strategy and Plan Design Survey,” top concerns for employers include expanding access to mental health care, monitoring trends in health care delivery and preparing for an uptick in health care spending.

As a result of the pandemic, patients delayed or missed doctor visits and preventive screenings, and depression, anxiety and substance use disorders surged. With that in mind, employers anticipate seeing an increase in medical services, late-stage cancer diagnoses and greater numbers of people with long-term mental health and substance use issues for years to come. For instance, 94% of employers anticipate an increase in medical services due to delayed care, while 91% remain concerned about long-term mental health issues stemming from the pandemic.

In 2020, the overall health care cost trend was 0%, though some employers experienced a negative trend, dropping to as low as -12%. In 2021, the health care trend is predicted to increase to 6% both before and after plan design changes. In 2022, the cost trend is expected to decline slightly, dropping from 6% to 5.8% after plan design changes. Pharmacy costs are 20% of overall health care spend.

Returning to Care

Ellen Kelsay, president and CEO, Business Group on Health, says employers are acting to better inform and educate their workforces to encourage employees to take care of their health.

“They are making sure individuals go back to routine screenings, immunizations and physicals that might have gotten put on the back burner,” she says. “Because if employees don’t, there is a concern there will be bigger health conditions down the road, so prevention is key.”

The survey found 57% of employers say implementing more virtual health opportunities (e.g., emotional well-being, physical therapy, digital coaching, condition management, medical decision support, sleep therapy) is a top priority for 2022. Forty-three percent cite expanding access to mental health services as a top priority, and 31% are aiming to implement a more focused strategy on high-cost claims.

Ian Stark, lead actuary, Pacific Northwest, at Aon, says there’s not only a concern about health cost trends rebounding, but there is a real war for talent right now. “Employers are caught between cutting benefit costs but not creating a barrier that would impact recruiting,” he says, adding that there is more interest now in pushing for newer ideas than in the past.

As a result, employers are increasingly interested in expanding telemedicine and virtual care. Stark notes that in past years, telemedicine was less frequently used and, when it was, it was often used for lower acuity conditions. Now, employers and employees are engaging with virtual care vendors with an expanded list of services and ways to connect people with them.

Kelsay says efforts to make sure employees who have chronic health conditions see their doctors regularly, take medications and manage their conditions are similar to the efforts to encourage preventive care for all employees.

“There are also travel concerns about employees reaching centers of excellence [COE],” she adds. “Employers are taking steps to make sure employees can go to high-quality centers of care for treatment of more significant conditions.”

Employers are also concerned that, post-COVID-19, there will be significant long-term mental health and substance abuse issues for employees and maybe for a larger percentage of the population, according to Kelsay. So they are making sure there are no barriers to access services, deploying virtual health solutions to make it easier to get help and reducing the stigma so employees are comfortable getting care.

Offering High-Quality, Low-Cost Care Options

According to the Business Group on Health survey, many employers in post-pandemic environment are partnering with new COEs or expanding COEs to include more conditions. A center of excellence is an area of health care specialization in a medical center that is recognized by the medical community as providing the most expert and highest level of care. Eighteen percent of employers said expanding COEs to include additional conditions is a top priority for 2022. Employers also said they will continue using high-performance networks—networks of high-quality, cost-effective medical service providers that agree to provide care for a specific population at lower cost.

Kelsay says employers plan to negotiate on costs for delivery systems. “More employers are using value-based payment models and moving away from fee-for-service payment models,” she says. “Those using fee-for-service models are negotiating with plans or directly with providers for better prices.”

As employees return to care, employers are making an effort to get quality/cost data into their hands so they can get high-quality care but not at the highest cost, says Stark.

“This is tied to more conversations about using health care TPAs [third-party administrators] because having a health care navigation vendor also be the organization in charge of contracts could create a conflict of interest,” he says. “To have the best-in-class discounts and the best-in-class navigation services, employers are looking to TPAs—any claims payer outside of major carriers—whose primary focus is the payment of claims rather than the creation of networks.”

Stark says employers are also having conversations about direct contracting for employees in particular geographic locations.

“They are considering creating relationship with a major hospital system or health systems in regions where employees live to see if they can get a preferred deal,” he explains. “They then steer employees to that system or systems for care.”

With the goal of driving employees to high-value, low-cost care, Stark says there’s also a big move to encourage the use of high-deductible health plans (HDHPs) and, for some populations, saving in health savings accounts (HSAs).

“But employees have to have a certain level of income for that to be truly an option,” he adds. “Employers are introducing copays for employees who have primary care physicians so they have that first dollar to pay for high-value, low-cost care. They are still able to use HSAs for high-cost items but not for low-cost items. HSAs are not the silver bullet for all populations as employers hoped they would be.”

Improving Employee Access to and Cost of Care

Stark notes that the pandemic has highlighted instances of employees avoiding care for perceived or actual lack of access.

One way to address this is with specialty medication coupon programs that major pharmacy benefit managers (PBMs) are offering. “This is when a specialty medication manufacturer has a coupon so the insured individual pays a reduced amount but the insurance company pays the PBM the full amount,” Stark explains. “Manufacturers have found a way for the coupon to apply before insurance pays. People were reluctant about these coupons in the past because they were new and required individuals to go through steps to activate the coupon, but now the savings available is more enticing than the fear of interrupting the employee experience.”

Employers are more aware of equity and inclusion in benefits, Stark says. They are having conversations about salary-based benefit payments or employer contributions to make sure the cost of benefits is not a barrier to seeking care for lower-wage workers. He says this is particularly true for tech companies and others that have a smaller proportion of low-wage employees.

“Cost sharing with employees, moving to HDHPs, increasing deductibles and decreasing subsidies were very common during the recession time frame, but employers are much more reluctant now to pass along cost increase to employees,” Stark says. “Employers are finding ways to keep employee contributions for benefits flat or keep plan designs as stable as possible. There is more awareness now than before the pandemic of making benefits less of a distraction for employees.” He adds that he hasn’t seen employers raise employee cost sharing of health benefits in anticipation of the expected spike in costs.

More information about the Business Group on Health’s “2022 Large Employers’ Health Care Strategy and Plan Design Survey” is available here.