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Chronic Care Management Keeps Health Spending Under Control

Help people with chronic conditions to avoid expensive hospitalizations

A bearded man sitting at a desk in an office.

The clear majority of employers' health care spending goes toward a relataively small number of health care consumers, often those without effective support for managing their chronic conditions.

Generally, "20 percent of people with employer-based health benefits in the U.S. accounted for 80 percent of employers' total spending on health care services," a new report from the nonprofit Employee Benefit Research Institute (EBRI) shows. EBRI found. Even more startling, 1 percent of covered employees or family members accounted for 28 percent of health care spending in employer-sponsored health plans.

The 5.8 million individuals examined in the study used $38 billion in health care in 2017.

"The characteristics of the persistently high-cost claimant group were different from the characteristics of the population never in the top 10 percent" of health care spenders, said Paul Fronstin, EBRI's director of health research and education and co-author of the report. "Sixty-three percent of those persistently in the top 10 percent of claimants, as well as 59 percent of those in the top 10 percent for three to four years, were ages 50-64, compared with 30 percent among those never in the top 10 percent. In addition, persistently high-cost claimants were also much more likely to be the spouse" of an employee.

Shifting costs to employees through higher deductibles or co-pays may be ineffective in addressing a large portion of health care costs, EBRI found. "Consumer engagement through cost-sharing may be effective in addressing day-to-day use of health care services, but it will not address the bulk of health spending that is not only above deductibles, but also above out-of-pocket maximums," Fronstin said.

Chronic Conditions Linked

While employers can face sky-high bills in any given year for catastrophic care following major accidents or for newborns requiring intensive care, for instance, persistent high-spenders were those living with chronic health conditions, the researchers found. Moreover, the report highlights the failure to help diabetics manage their care as a major factor leading to persistent high-cost claims:

  • From 2013 through 2017, one-third of people who were persistently in the top 10 percent of claimants had diabetes.
  • More than half of those also had hypertension, and about a quarter had respiratory disease, back problems or connective-tissue disease.

Prescription drugs accounted for 52 percent of total health care expenses among the top 10 percent of spenders from 2013 through 2017 but just 26 percent of total health care expenses among everyone else.

[SHRM members-only toolkit: Managing Health Care Costs]

Managing Chronic Care

Given the cost challenges posed by these findings, it's not surprising that Mercer, an HR consultancy, recently reported that large U.S. employers plan to make monitoring and managing high-cost claimants their top health care priority.

Mercer's National Survey of Employer-Sponsored Health Plans was conducted during the summer of 2019 and drew responses from nearly 2,600 employers. When asked about their health care priorities for the next five years, the following concerns were identified as important or very important among employers with 500 or more employees:

  • Monitoring/managing high-cost claimants (80 percent).
  • Managing costs for specialty pharmacy benefits (71 percent).
  • Creating a culture of health (68 percent).
  • Enhancing health advocacy and care-navigation/concierge services (48 percent).

"As medical science produces an unending stream of sophisticated new treatments and drug therapies, the incidence of high-cost claims is rising, driving up the cost of coverage for both employers and employees," Mercer reported. "Programs that provide intensive support and advocacy to employees faced with a serious medical issue can improve the patient experience—and even care outcomes—while lowering cost."

Providing intensive support to employees faced with serious medical issues can improve care outcomes while lowering cost.

The largest employers are taking the lead in offering enhanced health advocacy and intensive case management services, as well as programs that make it easy for members to seek an expert medical opinion on a diagnosis or their treatment plan, explained Tracy Watts, Mercer's national leader for U.S. health policy in Washington, D.C.

"Health advocates help patients and their families navigate a complex health care system to get to the right provider at the right time," Watts said. "When care is better coordinated, we often see less wasteful health care spending."

High-cost specialty drugs, such as those used in cancer treatment, are often a factor in high-cost claims, she noted. While spending on all prescription drugs rose 5.5 percent in 2019 among large and midsize employers, spending on specialty drugs rose 10.5 percent.

In response, over half of all large and midsize employers (52 percent) now steer employees to a specialty pharmacy, which typically provides enhanced care management, such as administering some drug therapies at the patient's home rather than at a hospital or clinic, Watts pointed out.

Walmart's Bold Health Care Initiative

Offering help to manage chronic care is among the health care priorities for Walmart, the largest private employer in the U.S. The company said recently it will roll out new health care benefits for employees beginning Jan. 1, 2020.

Lisa Woods, Walmart's senior director of U.S. benefits, noted in an October announcement that for its 2020 medical plan, Walmart is trying new care management concepts in select markets, including the following:

  • In northwest Arkansas; Orlando and Tampa, Fla.; and Dallas/Fort Worth, Texas, Walmart will be testing Featured Providers, a program that helps connect patients with local doctors who have a demonstrated history of providing the most-appropriate patient care.
  • In North Carolina and South Carolina, the company will be testing the Personal Healthcare Assistant, a concierge service that works via a website, a phone number and an app, to help employees address issues such as billing and appointments, finding quality providers and understanding a diagnosis. The assistant will also help with needs such as coordinating transportation and finding child care during appointments.
  • In Colorado, Minnesota and Wisconsin, Walmart is expanding its telehealth offering to include preventive health care, chronic care management, urgent care and behavioral health care. All video visits are $4 per visit.

"Employers must ensure they're doing all they can to address increasing health care costs, both to ease the financial burden on employees but also to protect the business' bottom line," said Misty Guinn, director of benefits and wellness at Benefitfocus, a benefits management software firm based in Charleston, S.C.

"I applaud Walmart for adopting a more holistic plan design," she said, adding, "however, it's also important employers take more proactive action on the back end by examining results of cost-containment strategies," such as analyzing claim trends and implementing targeted cost-management programs.

Related SHRM Articles:

Employers Look to Value-Based Health Care StrategiesSHRM Online, November 2019

Managing Diabetes Is a Workplace Health Priority. Digital Tools Can Help, SHRM Online, October 2019

Average Family Premiums Now Top $20,000, Employers Say, SHRM Online, September 2019

Employers' Health Costs Could Rise 6% in 2020, SHRM Online, August 2019


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