Health Plan Changes for 2023 (and Beyond) Look to Enhance Affordability

More than 2 out of 3 U.S. employers (67 percent) plan to prioritize controlling rising health care benefits costs over the next three years. And with many employers expecting costs to rise steadily in the foreseeable future, they are pursuing several initiatives to manage costs and make benefits more affordable for employees.

These are among the key findings in a new survey by consultancy WTW.

The survey found that U.S. employers project their health care costs will jump 6 percent next year compared with the average 5 percent increase they are experiencing this year. Over half of respondents (54 percent) expect their costs will be over budget this year.

A total of 445 U.S. employers participated in the 2022 Best Practices in Health Care Survey, conducted in August. Respondents employ 8.2 million workers.

"With no end in sight to projected cost increases, the need to manage health care costs and address employee affordability has never been greater," said Courtney Stubblefield, insights and solutions leader, health and benefits, at WTW. "Yet, with so many potential actions, employers must focus on changes that go beyond addressing their employees' needs to also support efforts to attract and retain talent during a tight labor market."

To mitigate higher health care costs, 52 percent will implement new programs or switch to vendors that will reduce their total costs, while 1 in 4 (24 percent) will shift costs to employees through higher premium contributions.

Among the actions respondents are using to manage costs and enhance employee affordability are the following:

• Health plan budget boosts. Two in 10 employers (20 percent) added dollars to their health care plan without reallocating funds from other benefits or pay. Another 30 percent expect to do so in the next two years.
  

• Defined contributions. Four in 10 employers (41 percent) reported using a defined contribution strategy with a fixed dollar amount provided to all employees that differs by employee tier. Another 11 percent are planning or considering doing so in the next two years.
  

• Evaluations of employee contributions by income. The number of employers that examine employee health payroll contributions as a percent of total compensation or income as the basis for benefits design decisions is expected to more than double from 13 percent this year to 32 percent in the next two years.
  

• Contribution banding. More than a quarter (28 percent) structured payroll contributions to reduce costs for targeted groups, such as low-wage employees, or by job class. Another 13 percent are planning or considering doing so in the next two years.
  

• Low-deductible plan. Three out of 10 (32 percent) offered a plan with low member cost sharing (e.g., no more than a $500 deductible for a single preferred provider organization plan) this year; another 7 percent are planning or considering doing so in the next two years.
  

• Fraud, waste and abuse programs. A quarter of respondents (27 percent) used programs to combat fraud, waste and abuse. Another 22 percent expect to do so by 2024.
  

• Out-of-pocket costs. Nearly a quarter (23 percent) implemented higher out-of-pocket costs for use of less efficient services or site of service, such as the use of nonpreferred labs or high-cost facilities for imaging, or respondents mandated the use of high-quality, cost-effective centers of excellence for medical care. Another 19 percent are planning or considering doing so by 2024.
  

• Concierge navigation. Two in 10 (21 percent) offered concierge navigation even if it requires movement from a full-service health plan to a third-party administrator. Another 25 percent are planning or considering doing so by 2024.
  

• Voluntary benefits. Over a third of respondents (35 percent) added or enhanced voluntary benefits such as supplemental health insurance (e.g., additional hospital coverage, cancer coverage, disability income replacement) in case of a catastrophic event. Another 27 percent are planning or considering doing so by 2024.

"Employers that act now to predict, plan and implement solutions and strategies that balance employee affordability objectives with escalating prices can avoid having to take desperate measures in a rising health care cost environment," said Tim Stawicki, chief actuary, health and benefits, at WTW. 

"Without question, employers face difficult challenges in the next few years," he added. "And with limited budgets, the challenge of making decisions that consider health care affordability and engagement is exponentially greater."

Health Plan Costs Rebound

"Medical plan cost increases for 2023 are returning to pre-pandemic levels, despite significant fluctuations as deferred care rebounded and COVID-19 variants peaked," according to an analysis by HR advisory firm Segal, which projects a 7.4 percent per-person cost increase for open-access preferred-provider plans. 

Similarly, the International Foundation of Employee Benefit Plans recently reported that corporate employers project a median increase of 7.5 percent for medical plan costs next year.

Related SHRM Articles:

Curbing Rising Health Care Costs, HR Magazine, September 2022

Cancer Now Top Driver of Employer Health Care Costs, Survey Shows, SHRM Online, August 2022

Medical Plan Costs Expected to See Bigger Rise in 2023, SHRM Online, August 2022