Healthcare Affordability

Two out of three U.S. employers (67 percent) plan to prioritize controlling rising health care benefit costs over the next three years, according to recent research from Willis Towers Watson (WTW). The 2022 Best Practices in Health care Survey noted that 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.

The survey found U.S. employers project their health care costs will jump 6.0 percent next year compared with an average 5.0 percent increase they are experiencing this year. Most employers see little relief in sight, as 71 percent expect moderate to significant increases over the next three years. Additionally, 54 percent expect their costs will be over budget this year, WTW found. On top of managing costs, 42 percent cite managing employee affordability as a top priority. To address a higher-cost environment, 52 percent will implement programs or switch to vendors that will reduce total costs, and 24 percent will shift costs to employees through higher premium contributions.

“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 for 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.”

The survey found the following action employers implemented or expect to pursue to manage costs and enhance affordability:

• Health plan budget boost: 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.
• Evaluate 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 benefit 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: 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 use of non-preferred labs, high-cost facilities for imaging or mandated centers of excellence. 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 and vendor solutions 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 for health and benefits at WTW. “Without question, employers face difficult challenges in the next few years. And with limited budgets, the challenge of making decisions that consider health care affordability and engagement is exponentially greater.”

From WCI's HR Answers Now ©2022 CCH Incorporated and its affiliates. All rights reserved.