Employers face tricky benefits year amid inflation, tight labor market
Employers grappling with surging health care costs are embracing new tech-driven care arrangements and alternative payment models to cushion the financial blow to their workers.
The big picture: Companies anticipate a median 7% increase in medical costs for next year but know passing that on to employees could be disastrous in a tight labor market, experts said.
- Employers have warned that health care spending is on an unsustainable trajectory and that provider consolidation is limiting their ability to reduce costs.
What they're saying: "Employers have complicated decisions to make," said Cynthia Cox, vice president at Kaiser Family Foundation.
- "You can only do so much cost shifting before somebody says, 'Look, the unemployment rate is 3+%. I can go get a job anywhere I want. You're not giving me the health benefit I need. I'll just go somewhere else," said Trevis Parson, chief actuary for Via Benefits at Willis Towers Watson.
State of play: The inflationary pressure is accelerating the adoption of apps, telehealth and other digital tools that streamline the process of connecting patients with providers, United Healthcare's chief growth officer Brandon Cuevas told Axios.
- For example, he said, UHC has seen increased employer interest in self-guided options and virtual coaching in behavioral and maternal health, both of which are experiencing high demand in the aftermath of the pandemic.
- "The cost of a traditional treatment has been cut down by 80% and the speed to care, getting on the right care path, has gone down by 60%," he said, referring to another example, a virtual center for excellence for migraines that connects patients directly with specialists.
- United Healthcare has also incorporated resources that can address social determinants like housing, food insecurity or transportation that factor in health outcomes.
An International Foundation of Employee Benefit Plans cost survey found these kinds of purchasing and provider initiatives will have a greater impact than cost-shifting through higher premiums, deductibles and copays.
- "It's not just the dollars anymore ... you don't want someone back in the hospital a week after you let them out," Parson said.
Between the lines: More employers also are looking to more preventive care and early intervention, by adding advanced primary care vendors to their packages and contracting directly with companies like OneMedical, Everside Health or Vera Whole Health, said Dustin Grzeskowiak, a principal actuary at Milliman.
- Often companies will cover the membership or total price of the service and contract on a per-member basis. Employees often benefit from virtual or same-day care as well as longer visit times with providers in these settings, he told Axios.
- "It's a way of providing an enhanced benefit to employees but not adding costs," Grzeskowiak said.
Be smart: The companies are also looking at alternative ways to provide medical benefits to their retirees over the next three years, per a new survey from WTW.
- Those costs for retirees who aren't eligible for Medicare are projected to increase 4.8%, up from 3.6% this year.
- Some employers plan to replace their traditional group plans for pre-Medicare retirees with individual coverage through private marketplaces. There's also the option of savings accounts to help workers cover future medical costs, Parson said.
Looking ahead: Employers and health insurers are encouraging workers to catch up on screenings, annual physicals and immunizations post-pandemic, aware that the cost of deferred care could exacerbate an already tough cost environment.
- "We see employers really communicating and encouraging use of benefits and adding new benefits," said Ellen Kelsay, CEO of the Business Group on Health.
- While telehealth benefits used to be an afterthought, more companies are putting it front and center by expanding the type of services that can be covered through virtual visits.
Yes, but: Some employers could, of course, conclude prices have risen across the board so much that workers will simply have to take the hit.
What we're watching: Whether all these moves really drive down spending and head off catastrophic costs, or whether future years will end up being costlier for everybody.