As we head into 2018, large employers are bracing for a 5 percent rise in the cost of providing employee health care benefits, according to the latest National Business Group on Health* survey. In a world where health care costs seem to only go in one direction, that may not be a surprise. Yet, new data and insights related to employee health are enabling employers to craft novel strategies to bend, or at least stay on top of, the cost trend. Here are five things we learned in 2017 that can help employers turn the cost challenge into an opportunity to better manage expenses in 2018 and beyond.
1. High-cost claimants are the key
In late 2016, the American Health Policy Institute** analyzed claims data from 26 large employers and found that the average high-cost claim has a price tag of $122,382 per year, or 29.3 times as much as the average member claim. Though they represent just 1.2 percent of all members, high-cost claimants make up 31 percent of total health care spending for the surveyed employers. Cancer treatments, heart disease, live birth/perinatal conditions, and blood infections are among the costliest claims, the report says, adding that 53 percent of those costs represent chronic conditions, while 47 percent cover acute conditions.
Recognizing this reality, savvy employers are developing new and improved strategies to better manage the care of these costly claimants. For instance, some are taking a closer look at how to manage the big C word – cancer.
For example, one large manufacturing employer has just begun some groundbreaking work to help identify and assist cancer patients earlier in their diagnosis, which is improving outcomes and reducing costs. We’re excited to see more about those results soon.
2. Stay ahead of high-cost, high-variation surgeries
While there may be some overlap with high-cost claimants, another area of high spend is employees who have surgeries for preference-sensitive conditions, e.g., joint replacement surgery (knees and hips), back surgery, hysterectomy or bariatric surgery.
These are called preference-sensitive because in most cases the employee has alternative treatment options.
In 2017, ConsumerMedical reviewed Truven’s Marketscan data and learned that, on average, an employer with 10,000 employees has approximately 258 individuals contemplating surgery for one of the five conditions noted above. The average cost-per-episode for these surgeries is a staggering $29,700. That means employers spend around $90 billion annually on these procedures and their related costs.
Many of these patients might actually choose a lower-cost option with a better health outcome if they were fully aware of their choices. This represents an enormous opportunity for employers to save money and improve health outcomes. One way to help guide employees is by offering a medical decision support program. A study of one large employer that leveraged predictive modeling and financial penalties to spur decision support engagement realized savings of $4.7 million from just 206 employees.
Guiding these surgery candidates toward high-quality providers is an equally powerful strategy for avoiding costs, including the costs of misdiagnosis and unnecessary drugs. The National Business Group on Health (NBGH) reported 88 percent of employers expect to use COEs in 2018 for certain procedures such as orthopedic surgery, in an effort to contain costs and improve the value of care.
3. Keep experimenting with new ways to manage the cost of drugs
The rising cost of specialty drugs is a major reason why health care expenses are continuing to rise. As Mike Thompson, president and CEO of the National Alliance of Healthcare Purchaser Coalitions recently said, “If you’re in the kitchen and one of these new specialty drugs rolls under the refrigerator, you’ll throw out your fridge, because the pill costs more.”
According to PwC, in 2018, employers will explore new technologies, such as artificial intelligence, to match people with the best treatments, along with traditional strategies, such as requiring prior authorizations for costly specialty drugs and instituting step therapies. In addition, employers are paying closer attention to treatment environments, looking for opportunities to shift the delivery of care to lower-cost settings.
4. Employees need more support with behavioral health
With more employees experiencing a behavioral health issue, employers are recognizing the need to provide greater employee support in this critical area as well. A 2017 survey conducted by ConsumerMedical found that almost half of U.S. employees had dealt with a mental health issue on behalf of themselves or a loved one in the last year―and most reported that this was a distraction for them while at work.
The reality is that healthcare expenses, such as medical and pharmacy claims, are only the tip of the cost iceberg for employers; they are compounded by the productivity, absenteeism and related expenses that result from employees with behavioral health concerns.
Unfortunately, the traditional support platforms offered by employers may not be enough. For example, studies show that only about 5 percent of employees take advantage of their company’s Employee Assistance Program (EAP). Employers are learning they need to do more.
According to Willis Towers Watson survey*** of 314 mid- and large-sized companies, employers’ top health care priorities over the next three years include: locating more timely and effective behavioral health care, integrating behavioral health with medical and disability case management, providing better support for complex conditions, and expanding access to care.
5. Consumerism is no longer the panacea
While most large employers continue to lean on consumer-directed health care as a strategy, we are entering a new era, and that is good news for consumers. According to PwC, after shifting healthcare costs to employees for years, employers are starting to ease off.
Employers are beginning to recognize that cost sharing has its limits. In 2017, research showed us―yet again―that cost sharing may cause employees to skip needed care.
Today, employers are realizing that health benefits need to place a greater focus on the employee experience.
NBGH President and CEO Brian Marcotte says, “One of the most interesting findings from the (NBGH) survey is that employers are focused on enhancing the employee experience….For example, there is a big increase in the number of employers offering decision support, concierge services and tools to help employees navigate the healthcare system. The complexity of the system and proliferation of new entrants has made it difficult for employees to fully understand their benefit programs, treatment options and where to go for care.”
As we head into 2018, we will face another year of rising health care costs. But thanks to research, surveys and some trial and error, employers are learning more about the drivers of costs and the strategies designed to control them―while improving employees’ health outcomes. It is a constant struggle to stay ahead of the cost curve and meet employees’ needs, but that is the goal we are all committed to pursuing as benefits leaders and professionals.