Pension & Benefits News With health care costs projected to rise another 5 percent in 2020, employers look to new strategies to control costs
Tuesday, October 29, 2019

With health care costs projected to rise another 5 percent in 2020, employers look to new strategies to control costs

By Pension and Benefits Editorial Staff

Curbing the cost of health care and increasing its affordability remain the top priorities for almost all employers over the next three years (93 percent), according to the 24th annual Best Practices in Health Care Employer Survey by Willis Towers Watson. Yet nearly two in three (63 percent) employers see health care affordability as the most difficult challenge to tackle over that same period.

Employers expect health care cost increases of 4.9 percent in 2020, up from 4.0 percent in 2019. Despite this cost increase, 95 percent of employees are very confident their organization will continue to sponsor health care benefits to active employees in five years. Moreover, employers' longer-term commitment to sponsoring these benefits 10 years from now hit 74 percent, the highest level in the past decade.

The rising cost of health care puts financial pressure not only on employers, but also their employees. In fact, 89 percent of employers believe rising health care costs are a significant source of financial stress for their employees.

“Relentless health care price increases continue to crowd out other benefits, making affordability a challenge for many workers,” said Julie Stone, managing director of Willis Towers Watson's specialty practices within its health and benefits business. “In a full-employment economy, employers feel the pressure to offer competitive benefits and can't compromise on employee affordability. With employers and employees seeing no end in sight, many companies are getting creative and tapping into overlooked strategies to shrink the total bill.”

The survey identified the following three cost-saving measures for employers to explore:

  • Cutting drug costs. One of the main drivers of growing affordability concerns among both employers and employees is pharmaceutical spending—notably, the increased cost and continued inflation of specialty pharmaceuticals. The survey noted that more employers have been adopting comprehensive solutions, including roughly half of employers evaluating and managing specialty pharmacy spend not only through the prescription benefit, but also exploring opportunities through the medical benefit (projected to grow from 49 percent today to 85 percent by 2020).
  • Value-based designs. More employers continue to make stepwise changes in implementing value-based designs to manage costs year over year while also driving better health outcomes for their employees, Willis Towers Watson found. A subset of employers are diving deeper into new strategies that could help improve access to care beyond the approaches of high-performance networks (growing from 16 percent to 52 percent adoption by 2021) and the use of centers of excellence within the health plans (growing from 45 percent to 74 percent by 2021), which are reaching a critical mass of employers.
  • Employee emotional wellbeing. As employers look to cut costs while enhancing their population's wellbeing, mental and behavioral health ranked the highest as the top clinical area of focus over the next three years, selected by two in three employers. The majority of employers are working to build full-blown strategies for a holistic solution to emotional health by redesigning their employee assistance programs to better address emotional and financial wellbeing (expected to jump from 33 percent to 74 percent in three years) and building an organization-wide behavioral health action plan (leaping from 25 percent to 68 percent in three years).


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