An Interview with Liz Spath, Mercer

Employers Finding New Ways to Hold the Line on Health Benefit Cost Growth

The high cost of healthcare poses major challenges to employers and their employees. Although the average total health benefit cost per employee rose only 2.6% in 2017 according to the Mercer National Survey of Employer-Sponsored Health Plans 2017, the nation’s largest survey of its kind, health coverage still represents an enormous expense (Figure 1). Total health benefits cost averaged $12,229 per employee, or 14% of total payroll, in 2017 (Figure 2).

In order to gain ground on some of their biggest cost drivers employers are addressing chronic conditions with enhanced care management, directing employees to higher quality care, and targeting double-digit spending growth on specialty drugs with a variety of new pharmacy solutions. 

“When you reduce cost by improving quality, that’s a win-win. Most employers want to give employees choices. For many employees, enrolling in a high-deductible plan with an HSA is a smart financial move, but it takes some education,” said Liz Spath, a healthcare benefits consultant in Mercer’s Boston office. “Decision-support models and other resources can help employees reach that comfort level, and most employers would rather go that route than take away other plan choices.”

“Enrollment growth in CDHPs may have slowed in 2017, but employer strategies to promote consumerism and engage employees in improving their health habits are in full swing,” said Ms. Spath. “And advances in health IT are making this outreach more personalized and more powerful.”

Here are some things employers are doing to improve quality and manage costs, according to Mercer:

• To help consumers make more informed healthcare decisions, 82% of employers now provide a “transparency tool” – an online resource to help members compare the prices – and in some cases, the quality ratings – of different healthcare providers.
• Employers are helping people stretch their healthcare dollars by promoting access to lower-cost services. Telemedicine services – access to healthcare providers by phone, web portal, or televideo as a covered benefit – are a prime example. Savings for participants can be significant, given that a typical telemedicine visit costs less than $50 while a typical office visit costs about $125.
• About half (53%) of large employers now steer employees to a specialty pharmacy, which typically provides enhanced cost management.  For example, some therapies can be administered at home at less cost and greater convenience for the patient and family. Other approaches to managing specialty drug spending include step therapy (starting a patient on a less-expensive drug first, if appropriate), and evaluating bio-similars (generic forms of specialty drugs).
• Employers, especially the largest, are taking aim at the traditional fee-for-service provider reimbursement system.  Accountable care organizations, centers of excellence and patient-centered medical homes are healthcare delivery systems often built with alternative payment models that stress the quality of care provided, not just the quantity of services provided. These models are now widely available and employers are starting to take the important step of providing employees with financial incentives to seek these avenues of care.
• Recognizing that an employee with a serious medical condition may not be in the best position to “shop” for care, employers are providing health advocacy services and navigators. The best of these programs feature medical professionals who help members find the right healthcare provider, compare costs, and resolve claims problems. Another service that seeks to prevent unnecessary treatment and ensure the most appropriate treatment is the expert medical opinion program. These programs make it easy – and usually cost-free – to seek a second opinion from highly experienced doctors.

“While it’s hard to say how much these initiatives, taken together, have contributed to the slowdown in cost growth nationally, the fact that individual employers are seeing positive results is encouraging,” said Ms. Spath. “Consumerism has an important role, but it can’t solve for all of the inefficiencies in the healthcare market. Getting more value for the healthcare dollar is the common thread in these new strategies.”