As employers face moderate increases in premiums for employee health coverage in 2018, they’re again studying different tactics to control their costs.
That’s one of the common threads showing up this year in a number of surveys on health benefits, as employers do more than shift rising costs to employees.
The surveys show employers’ push for greater use of telemedicine, a preference for medical “centers of excellence,” greater availability of transparency tools for employees to look up quality data and the costs for tests and procedures, and more care management for people with chronic medical conditions such as diabetes.
Results from employer surveys indicate companies are “moving beyond those traditional strategies” of just cost-shifting, said Jerry Konal, a senior consultant in health and benefits at Willis Towers Watson PLC’s Southfield office.
Employers are more strategic about employee health benefits and “adopting programs that are actually more conducive to their specific needs, rather than pulling something off the shelf with everybody else,” he said.
“There’s a lot of energy and interest (by employers) in moving down a different path and looking at health care delivery. They’re looking deeper at some different things around the clinical side of the equation,” Konal said. “It’s an evolution that’s moving in the right direction. Regardless of what’s going on around health care reform, because that’s a whole different topic, we have this ongoing evolution into exploring more innovative and effective programs.”
One example: A survey this summer of 678 large employers by Willis Towers Watson found 44 percent now fashion their benefits to encourage employees to use medical centers of excellence that have been designated by their health plans as offering higher quality and value. Another 35 percent plan to or will consider it by 2019.
In a similar survey by Aon, 29 percent of 450 mid-sized and large employers with benefits covering 10 million people report they use centers of excellence in their health plan designs. Another 51 percent said they are considering it for the near future, according to the Aon survey.
Nearly nine of 10 large employers answering the National Business Group on Health’s annual survey said they expect to use centers of excellence in 2018 for certain medical procedures such as orthopedics and organ transplants.
More employers also are considering health coverage that uses a value-based payment model to reimburse care providers, according to Aon. Among the employers responding to the firm’s 2017 survey, 20 percent use a value-based design for benefits and 59 percent are considering it for the future.
Telemedicine, which allows patients to connect with a doctor online via a computer, smartphone or tablet, has quickly gained traction in just a few years as well. The Willis Towers Watson survey found 78 percent of responding employers incorporate telemedicine into their benefits and another 19 percent planned to do it by 2019.
The National Business Group on Health reports a 96-percent adoption rate of telemedicine by large employers, which compares to 90 percent and 70 percent in the two prior years, respectively. More than half of employers use it for behavioral health, double the rate a year earlier, according to the organization.
LEVERAGING NEW TACTICS
The annual surveys provide a benchmark for employers on how their health benefits compare with market norms and trends.
Michigan employers tend to follow national trends “for the most part,” although “our adoption rate in some of these new ideas is a little bit slower in coming,” Konal said. “Our adoption rate is not as aggressive as other parts of the country.”
In West Michigan, employers tend to offer richer benefits than the rest of the nation, said Jon Snead, a senior vice president and health and benefits practice leader of Aon’s Grand Rapids office.
“We’re still a very paternalistic market. We take care of our employees a lot better than what you see across the country,” Snead said. “It’s a much more partnered approach with the employees. They want to make sure that we continue to attract people into West Michigan.”
The heightened use of new tactics comes after employers in the last decade largely transitioned to lower-cost, high-deductible health plans, put in place higher co-pays and out-of-pocket maximums, and made employees pay a larger percentage of the annual premiums.
Even as premiums increases have moderated in recent years, employers began to hit a ceiling on how much health coverage costs they can shift to employees in a tight labor market.
“Because employers have had to adjust plan design for so many years straight, they really don’t have much room,” Snead said of their ability to continue cost-shifting.
“They’ve gotten to the point where we can no longer put that much burden on the employee,” he said. “Compensation and pay raises have not kept pace with the increase in the cost burden for health care, so employers are looking for different types of strategies to mitigate that cost.”
Snead notes that 80 percent to 90 percent of the employers that Aon works with in West Michigan have high-deductible health plans coupled with a health savings account as a benefit option for employees.
As employers nationwide head toward the annual open enrollment period this fall for 2018, they expect premiums increases in the single digits.
Aon projects average premium increases of 4.5 percent for 2018 following changes in benefit designs. Costs for 2017 increased an average of 3.9 percent.
Respondents to Willis Towers Watson’s survey expect an average increase of 5.5 percent for 2017, versus 4.6 percent in 2017, after changes in plan design. Preliminary data from Mercer’s survey this year shows average costs for employers increasing 4.3 percent in 2018.
Meanwhile, the National Business Group projects a 5-percent increase in 2018, driving the average cost of health benefits nationally to $14,156 per employee.
As they look at different ways to contain costs, employers also are implementing more programs for employees to better navigate their way through their benefits and decide what options are best for them. Companies are providing systems to help employees decide what care management will work for their illnesses, and are offering tools for them to look up what they might pay for tests or procedures, as well as the quality of specific care providers.
“You can’t just say, ‘Now your deductible is $2,000, good luck,’” Snead said. “You have to provide them with opportunities to manage their chronic conditions, the opportunity to look for the lower cost and the better quality services that are available to them, and give employees the tools they need to better manage their care and control their own spend and the spend of the health plan.”
However, employers who adopt and embrace new benefits strategies need to take care not to expect too much too soon, Snead said. Telemedicine, for instance, often has a low usage rate in the first year or more until employees get comfortable with it and see the lower cost compared to going to an emergency room or urgent care center during off hours.
As they introduce something new, employers need to act proactively to ensure employees understand benefits such as telemedicine, Snead said.
“You’re requesting a lot more from the employees than you used to,” he said. “Because of that, you have to provide them with the tools and the knowledge and the education in order to use it more.”