Traditional Health Benefit Cost Reduction Strategies Waning

There is a waning of traditional methods for decreasing employer health benefit costs, according to DirectPath and Gartner’s annual Medical Trends and Observations Report.

Continuing a trend seen for the past three years, not only are fewer employers imposing surcharges on their employees, but the amounts of the surcharges are also dropping. Only 21% of employers (down from 27%) have tobacco use surcharges in place. The median surcharge dropped 15%, to $50 (the dollar range also dropped, to between $20 and $150).

The data also shows fewer employers imposed a spousal/domestic partner surcharge—just 16% of respondents, down slightly from 18% of employers last year. The median spousal surcharge dropped $25 to $125 per month, with a range of $40 to $300 (down slightly from last year).

While three-quarters of the employers in the database (77%) offer at least one high-deductible health plan (HDHP), such plans represent only about one-third of all plans offered (39% individual and 34% family deductibles, versus 41% for both last year). HDHP plans appear to be waning, and the data indicates that employers are moving away from offering HDHPs as the only plan option to including it as one of several options.

Even though drug costs are soaring, the data shows median deductibles remained static and network copays for specialty drugs actually declined slightly.

And some employers have determined that there is little or no value to physical wellness programs. A handful have already eliminated their wellness programs or are reporting plans to phase them out in the near future. DirectPath says this may be because they are not seeing the results or the participation that they anticipated.

Kim Buckey, vice president of DirectPath, a health care consultant for large employers, shares with PLANSPONSOR both survey findings and anecdotal evidence about new strategies employers are pursuing to bring down health benefit costs.

One finding in the report is that voluntary benefits remain popular. “Standard” coverages such as dental, vision and disability coverage remain the most prevalent, with more than 83% of employers offering dental and vision on a voluntary basis (up from 75% last year). More than 70% offer long-term disability (LTD) coverage (up from around 63% last year), and 65% offer short-term disability (STD) coverage (up from 52% in 2019).

Adding voluntary products provides additional dollars that employees can use however they choose. In many instances, workers will use such products to help offset the cost of their deductible and/or for co-insurance. For example, obtaining critical illness coverage can also provide incremental additional coverage for those who can’t afford to pay medical bills for an illness or disability, Lydia Jilek, senior consultant at Willis Towers Watson, previously told PLANSPONSOR.

Buckey says with five generations in the workforce, there is no one-size-fits-all solution, and employers are recognizing the need to be competitive. “We continue to see a lot of interest in voluntary benefits; plan sponsors may offer a menu of choices tailored to their employee base. Voluntary benefits come at limited to no cost to the employer, as they are employee paid. This is one way of addressing the need to control cost health benefit costs,” she says.

She adds that offering dental and vision insurance in some ways is table stakes, but it is also a good safety net for employees who forego getting health care. She explains that dentists and eye doctors can identify health issues before become they become a big problem and expense. The DirectPath/Gartner report notes that both dentists and eye doctors can recognize signs of diabetes; eye doctors can identify high blood pressure and high cholesterol; and dentists may see signs of heart and kidney disease.

Buckey is also seeing a lot more focus on communicating about health benefit plans and programs, particularly for voluntary benefits, to ensure they are being used appropriately. “There is more focus not only on year-round communications, but one-on-one enrollment support,” she says. “This helps employees make good choices and better use of their benefits. When that happens, employers end up saving money.”

While HDHPs are still a viable way to control health benefit costs, one way employers are making sure employees get into the right health plan for them is by offering HDHPs as a choice among many options rather than the only option, Buckey adds.

Buckey says the shift away from cost-sharing has been going on for a few years and she suspects it is because employers recognize there are only so much costs employees can absorb. She is seeing a few more employers not covering out-of-network expenses at all. “This is a clear cost savings, forcing employees to see in-network providers,” she says.

Employers are pulling back from physical wellness programs, in part, because of a lack of use by employees; some are reluctant to provide information to employers, Buckey notes. She says that, over the years, data has shown the wellness activities employers reward most are typically those that generate data for employers. Data is good in that it helps employers tweak benefits strategy.

But Buckey sees a very interesting stat in the Medical Trends and Operations Report: a handful of employees are offering coverage for DNA tests such as 23andMe or Ancestry Health. This generates data for employees that they may use to improve their health or catch certain genetic conditions early.

Buckey says there is a huge jump in employers offering telemedicine. She says this is likely because insurers are now bundling that in their offerings, whereas it used to be a standalone option that employers had to pay for separately.

“Telemedicine provides a bigger-picture cost savings,” she says. She explains that employees—especially younger ones—are moving away from the primary care physician model and want on-demand access to medical care. They don’t want to wait to get an appointment; they want to be seen when it’s convenient. Buckey says employers are keeping copays for telemedicine visits low to help drive employees to that because the alternative is, if they don’t have a doctor, when they are not feeling well, they will go to the emergency room—a high cost for both employees and employers. In addition, offering telemedicine encourages employees to get care rather than forego care, which helps drive down costs over the long term.

Usage is low—Buckey says only 10% of employees or less are using it—but that’s one reason there are lower copays and an increase in benefits communications.

Looking ahead, Buckey notes that as employers start looking at their health benefit strategies for 2021, they don’t have the threat of the Cadillac tax in front of them. “For the past couple of years, we haven’t seen any dramatic health benefit design changes, but that may change,” she says.