Last year, "the average annual [plan] premium for employer-based family coverage rose 5 percent to $19,616, and for single coverage, premiums rose 3 percent to $6,896," according to the National Conference of State Legislatures. The nonprofit National Business Group on Health projects that for 2019, the cost of providing medical and pharmacy benefits will rise 5 percent for the sixth consecutive year.
Employers seeking to reduce their health care spending can consider a number of benefit design strategies other than just shifting costs to employees through high-deductible health plans. In three recent reports, researchers share their lists of the top five steps to consider beyond cost sharing.
Learn from Best-Performing Companies
Willis Towers Watson's 23rd Annual Best Practices in Health Care Employer Survey found that companies that use best-in-class health care benefit strategies will annually spend $3,548 less per employee on health care compared with other companies. The results were based on data provided by 554 U.S. employers with at least 1,000 employees each.
Best-performing employers "are effectively evolving their health care benefit strategies to enhance employee health and well-being while curbing costs," said Julie Stone, managing director of specialty practices and intellectual capital at Willis Towers Watson. "The lessons companies can borrow from the best performers are clear."
The survey report highlights these five practices of best-performing companies:
1. Ensure quality of care through value-based designs.
Best performers tie doctor and hospital payments to evidence-based, high-quality patient outcomes. "This model aligns the patient's and provider's incentives toward efficient and effective care, preventing reoccurrence of illness and reducing complications, or—when treatment is needed—getting the patient the right care and the right site of service, sooner," the report states.
In addition, 17 percent of best performers use bundled-payment approaches in their medical plans, compared with only 4 percent of high-spending companies. Bundled payments are a form of contracting that combines pre- and post-procedural care into one negotiated price that can deliver savings and simplify billing for organizations and employees.
2. Emphasize pharmacy strategies to cut overall costs.
As pharmacy benefit costs continue to climb, employers are finding ways to decrease drug expenses, such as more closely evaluating their spending on expensive specialty drugs, such as biologics that are injected or infused. Employers are encouraging the use of biosimilars as lower-cost, clinically effective options. To curb the cost of specialty drugs, 37 percent of best performers are changing their coverage to steer care away from hospitals and toward a doctor's office (or, if practical, self-administered at home), whereas only 19 percent of companies with above-average health care spending take this approach.
3. Offer integrated well-being programs.
As Generation Z enters the workforce and Millennials continue to advance in their careers, workers are seeking employers that encourage a healthy physical, emotional, social and financial lifestyle. For example, programs that help employees meet their short- and long-term financial goals and support a healthy, physically active lifestyle can help employees be more productive and engaged at work.
Forty-eight percent of best performers offer holistic well-being programs, compared with 34 percent of companies with higher than average health care spending.
4. Empower employees to make informed benefit decisions.
Best performers identify what the workforce needs and understand that each employee has a unique health care journey. By offering meaningful choice with a variety of benefit options, employees can personalize their benefit selection. To meet the varied needs of employees, best performers offer tools that support personalized enrollment decisions (59 percent). Of high-cost companies, less than half (45 percent) provide these tools.
5. Mine workforce data to ensure health care strategies work.
Best performers know how to evaluate their programs to improve future benefits: 53 percent of best-performing companies—and just 34 percent of others—are using data to analyze benefit results. For instance, they may conduct multiyear evaluations of claims data and employee feedback to see if their initiatives improved employees' health and well-being.
"As a company's health care program becomes an increasingly integral component of its culture, the need for C-suite support is paramount," Stone said. "Many employers have already adopted bits and pieces of these best practices, but to compete and succeed, top executives must design a vision for how their company—and its health care and benefit strategy—will evolve for the future."
[SHRM members-only toolkit: Managing Health Care Costs]
Another View of 'Top 5' Offerings
A recent report from the International Foundation of Employee Benefit Plans (IFEBP), an association of benefit plan sponsors, examined the prevalence of U.S. employers' cost-management techniques.
The IFEBP's report on its 2018 Employee Benefits Survey is based on responses received last year from 677 HR and benefits professionals and administrators across a range of industries and employer sizes. The most popular techniques employers are using to control rising health care costs are:
1. Case management services to identify barriers that may prevent people from getting the best care (used by 71 percent of respondents).
2. Nurse advice lines that provide a 24-hour resource for employees to get answers to their health-related questions (68 percent).
3. Prior authorization requirements to determine if a treatment is medically necessary (65 percent).
4. Health care claims utilization analysis to pinpoint the top health concerns of the workforce and address those concerns (61 percent).
5. Telemedicine, which allows health care professionals to evaluate, diagnose and treat patients online or over the phone (63 percent).
"Telemedicine stands out as the fastest-growing health care cost-management technique among employers," said Julie Stich, CEBS, associate vice president of content at the IFEBP. "In 2016, 44 percent of employers offered telemedicine options. By 2018, that number had jumped to 64 percent. Employees appreciate the 24/7 convenience of telemedicine, and both employers and employees see savings because costly trips to urgent care clinics or emergency rooms might be avoided."
Other common techniques included dependent eligibility audits (43 percent), four coverage tiers (40 percent), price transparency/comparison tools (38 percent), health care claims audits (37 percent) and health care consumer education (36 percent). Smaller but still significant numbers of employers are using other cost-management techniques such as spousal surcharges or carve-outs, where spouses are discouraged or blocked from enrolling in the plan (25 percent), and opt-out incentives, where participants are monetarily encouraged not to enroll in their health care plan (13 percent), IFEBP reported.
Top 5 Steps for Self-Funded Plans
"There are many viable cost-management benefit strategies for companies to explore, but many are unaware of their options," said Mike Barone, president of benefit broker Hub International's employee benefits practice.
A recent Hub report, The Employee Benefits Cost Management Challenge: Proven Strategies to Spend Less and Become More Competitive, recommends five cost-saving strategies specifically for self-funded plans, based on an analysis of the firm's client data. The recommended actions are:
1. Self-fund and take control. Self-funding increases an employer's financial control, plan design flexibility and plan management options. Once strictly a big-business strategy, self-funding is now seen as an option for companies with as few as 10 employees and can reduce an employer's health care spending by 4 percent to 10 percent annually, Hub found.
2. Join a stop-loss captive to reduce risk. Employers that self-fund health care costs typically buy stop-loss coverage to insure against extremely large claims. Instead of traditional stop-loss coverage, employers can join together in a group medical stop-loss captive, which allows each participating employer to maintain its own self-funded health benefits plan separate from that of the other member employers. More employers with 50 to 300 employees are looking for risk-sharing arrangements such as stop-loss captives, Hub noted.
3. Carve out a drug plan from medical insurance and re-evaluate pharmacy benefits every year. Putting a contract out to bid for pharmacy benefits can secure better terms—especially for costly specialty drugs.
4. Cap costs with reference-based pricing. Some routine health care services have widely different prices depending on the provider. Capping reimbursement at a percentage above Medicare's standard pricing, known as reference-based pricing, can encourage employees to avoid doctors and facilities that charge above-average prices for nonemergency services.
5. Offer clinical care management for chronic illnesses. Chronic conditions, such as diabetes, musculoskeletal pain and heart disease, continue to be the largest single contributor to employers' health care spending. Offering wellness programs reduces instances of chronic illnesses, while disease management programs can help employees control their conditions. Unmanaged diabetes, for instance, is responsible for 44 percent of kidney failure, Hub reported.
Related SHRM Articles:
Can Tech Tools, Incentives and Advice Inspire Health Care Shopping?, SHRM Online, October 2018
Employers Hold Down Health Plan Cost for 2019, SHRM Online, September 2018
For 2019, Employers Adjust Health Benefits as Costs Near $15,000 per Employee, SHRM Online, August 2018