Health Benefit Plan Sponsors Looking at New Ways to Cut Costs

As health plan cost growth continues to outpace wage increases and consumer price inflation, plan sponsors have turned to pharmacy management programs as the main strategy to keep annual increases in the single-digits.

In Segal’s 2018 Health Plan Cost Trend Survey, the survey respondents were asked to rank the cost management strategies most frequently implemented by group health plans in 2017. They were:

• Using specialty pharmacy management;
• Intensifying the pharmacy management program already in place;
• Contracting with value-based providers (including accountable care organizations and patient-centered medical homes);
• Increasing financial incentives on wellness design; and
• Adopting a high-deductible health plan.

“Some tactics that may help plan sponsors succeed in bringing down trend include designs that steer patients to the right treatment and establishing custom drug formularies,” says Eileen Flick, senior vice president and Director of Health Technical Services at Segal.

National Health Practice Leader Ed Kaplan adds, “Rather than simply continuing to shift costs to participants, plan sponsors will look to aggressively drive utilization to high-quality, low-cost providers. Strategies that mitigate risk such as wellness programs can also pay long-term dividends.”

Kaplan noted that while each plan sponsor has a unique set of goals, all share in the common objective of managing cost increases. “The most effective approach in our view is a three-pronged strategy that encompasses vendor management, plan design management and population health management,” he says. “Targeting solutions and strategies in these areas can result in plan sponsors maintaining control over providing high value medical benefits that are well received by current and future participants.”

Segal says medical plan trends are projected to be slightly higher than 2017 projections. Price inflation—not utilization—is the leading driver of trend.

Prescription cost-management strategies and improved vendor contracting are plan sponsors’ highest priorities.

Segal’s findings align with other surveys that find employers are utilizing strategies other than cost-shifting to participants to hold down health care costs. A Willis Towers Watson analysis found employers are shifting more benefits dollars to health care plans and less to retirement plans.