April 27, 2020

The Employer’s Response to the Increasing Cost of Healthcare

By Darlene Angelucci, Director, Assurance Services

The Employer’s Response to the Increasing Cost of Healthcare

One of the many challenges that employers are facing in 2020 is the rising cost of healthcare and the impact on their employees. According to Kaiser Family Foundation research, the annual cost of a family health insurance plan has now surpassed $20,000. This increase is due to a number of factors including escalating drug prices, particularly for specialty drugs; chronic disease (an individual with just one chronic illness costs employers nearly four times more than healthcare for a healthy individual), high-cost therapies coming to market; and industry consolidation.

In the past, employers have traditionally shifted higher healthcare costs to employees. However, despite their efforts to control utilization by offering high deductible plans and other cost-sharing measures, the medical cost trend still continues to outrun general inflation. Frustrated with the ever-escalating healthcare costs, employers are taking a much more active role in managing healthcare costs. For example, they are negotiating contract prices themselves, setting up provider networks and even building parallel health systems that they manage directly.

According to a 2019 survey conducted by the National Business Group on Health, 11 percent of large employers are now contracting directly with a narrow network of accountable care organizations, centers of excellence, onsite clinics or direct primary care options, steering employees toward these providers in an effort to better manage costs and improve health outcomes.

As we move through 2020, the goal will be to find ways to increase the efforts beyond 11 percent to a much larger proportion of employers. Payors and providers should continue their efforts to be a part of the solution, working to partner with employer coalitions and work groups to help solve the problems that contribute to the high cost of healthcare. Additionally, employers should focus their attention on innovative solutions to the problem by considering what can be done differently to enhance efficiency and effectiveness, with a focus on improving what is working and fixing what is not.

In an effort to mitigate the ever increasing healthcare costs, employers can take the following steps:

  • Become a “transparency steward”: Understand the needs of your employee population to determine the best benefits at the best price with the best outcomes. Understand both the employer and employee cost of those benefits.
  • Take the driver’s seat: Understand your role as the purchaser of healthcare services for employees and become an employer activist by pursuing new solutions for lower costs, improved access and enhanced quality.
  • Design a care menu, then manage it: This applies to both the health plan and any add-on benefits external to the health plan. Be clear in communicating with employees about costs, the actions to be taken by the employee and the expected outcomes if such action is taken.

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