Employers expect health care costs to increase 5 percent in 2016 and 2017

Employers expect health care costs to increase 5 percent in both 2016 and 2017, up from 4 percent in 2015, according to the Best Practices in Health Care Employer Survey from Willis Towers Watson. With these increases, employers expect average employee per-year costs to rise to $12,338 in 2016 and nearly $13,000 in 2017. Despite these cost pressures, Willis Towers Watson found that 81 percent of employers will make relatively modest changes to employee premium contributions and other cost-sharing provisions such as deductibles and out-of-pocket limits for 2017.

“With employee affordability concerns paramount, employers will focus primarily on changing coverage provisions for costly services to manage cost in 2017,” said Julie Stone, a national health care practice leader of Willis Towers Watson. “These include more restrictive pharmacy benefits, the continuing addition of surcharges for working spouse and dependent coverage, and offering incentives to encourage employees to use centers of excellence for specialty services.”

Pharmacy spending. The survey found that 88 percent employers identified managing pharmacy spending generally for high-cost specialty drugs specifically as their top priority over the next three years. Planned actions include:

Ensuring appropriate utilization. In 2016, 61 percent of employers have added programs to ensure appropriate use of high-cost drugs, up from 53 percent in 2015; 85 percent are considering doing so by 2018.

Addressing specialty pharmacy spending that occurs through the medical benefit plan. In 2016, 39 percent of employers have adopted this strategy, up from 26 percent in 2015; 82 percent will consider it by 2018.

Differentiating benefit coverage to influence site of care. In 2016, 19 percent of employers have made such changes; another 43 percent are considering them for 2018.

Dependent costs. The survey also showed that dependent costs remain a focus. In 2016, 28 percent of employers have already reduced spousal subsidies by adding surcharges for coverage when it is available through a spouse’s own employer. The percentage of employers adding a working spouse surcharge is expected to nearly double by 2018. The average surcharge is now about $100 per month in addition to required premium contributions.

According to Trevis Parson, chief Health and Benefits actuary for Willis Towers Watson, as a result of significant changes in the U.S. health care delivery system, in addition to changes in coverage for costly services other cost-saving measures, employers plan to implement include:

• Increasing enrollment in high-deductible health plans with tax-advantaged savings accounts, with more employers moving to full replacement; by 2018, nearly half (49 percent) of employers offering an account-based plan expect that to be the only choice available to employees.

• Encouraging use of centers of excellence that have proven quality outcomes for treating back, knee, cardiac and infertility issues by offering incentives.

• Moving to benefit designs that require employees to participate in other health-related activities to reduce employee cost-sharing

“Although cost management is always a focus, over the next 12 months employers also will be seeking to modernize their benefit offerings to appeal to a multi-generational workforce,” added Parson. “The 2017 open enrollment period will begin to showcase some of the changes, including expanded choice of core medical and voluntary benefits, greater use of technology for decision support and an enhanced, consumer-style benefit shopping experience.”

SOURCE: Willis Towers Watson press release, August 8, 2016.

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