Top Three Cost-Saving Strategies to Curb Rising Health Care Expenses

November 13, 2019
Inside HR
Health & Wellness
Read time: 5 mins

Curbing the cost of health care and increasing its affordability remain the top priorities for almost all employers over the next three years (93 percent), according to the 24th annual Best Practices in Health Care Employer Survey by Willis Towers Watson. Yet nearly two in three (63 percent) employers see health care affordability as the most difficult challenge to tackle over that same period.

Employers expect health care cost increases of 4.9 percent in 2020 compared with 4.0 percent in 2019. Despite this cost increase, 95 percent of employees are very confident their organization will continue to sponsor health care benefits to active employees in five years. Moreover, employers' longer-term commitment to sponsoring these benefits 10 years from now hit 74 percent, the highest level in the past decade.

The rising cost of health care puts financial pressure not only on employers, but also their employees. In fact, 89 percent of employers believe rising health care costs are a significant source of financial stress for their employees.

"Relentless health care price increases continue to crowd out other benefits, making affordability a challenge for many workers," said Julie Stone, managing director of Willis Towers Watson's specialty practices within its health and benefits business. "In a full-employment economy, employers feel the pressure to offer competitive benefits and can't compromise on employee affordability. With employers and employees seeing no end in sight, many companies are getting creative and tapping into overlooked strategies to shrink the total bill."

Top Three Cost-Saving Measures

While it's important for employers to approach their benefit strategy holistically, these three areas revealed emerging cost-saving measures for employers to tap into:

1. The prescription for cutting drug costs. One of the main drivers of growing affordability concerns among both employers and employees is pharmaceutical spending—notably, the increased cost and continued inflation of specialty pharmaceuticals. More employers have been adopting comprehensive solutions, including roughly half of employers evaluating and managing specialty pharmacy spend not only through the Rx benefit, but also exploring opportunities through the medical benefit (projected to grow from 49 percent today to 85 percent by 2020).

We also see two emerging strategies poised to gather momentum among employers:

  • More employers are attempting to offset specialty pharmaceutical costs by influencing the site of care—as the location where care is given can dramatically affect prices. In fact, the number of employers that say they plan to implement coverage changes to influence site of care for specialty pharmaceuticals dispensed through the medical benefit over the next few years is more than doubling (from 21 percent today to 55 percent by 2021).
  • A growing set of employers are intrigued by the possibility of biosimilars offering a lower cost option for patients in need of expensive specialty products. That is why 30 percent of employers have ensured they have appropriate formulary strategies to leverage biosimilars when available, with another 39 percent planning to take a more active approach in the next two years.

2. Maximize the value in value-based designs. More employers continue to make stepwise changes in implementing value-based designs to manage costs year over year while also driving better health outcomes for their employees. With employees financially strained by the cost of health care, employers see an opportunity to steer their staff toward the highest quality affordable health care.

We see a subset of employers diving deeper into new strategies that could help improve access to care beyond the approaches of high-performance networks (growing from 16 percent to 52 percent adoption by 2021) and the use of centers of excellence within the health plans (growing from 45 percent to 74 percent by 2021), which are reaching a critical mass of employers.

By applying design features or incentives, employers are nudging their employees toward higher value, appropriate care that is sourced efficiently and away from overused, potentially wasteful services:

  • The proportion of employers slashing out-of-pocket costs to steer employees toward proven services that produce positive health outcomes at a lower price tag will nearly triple over the next few years (from 17 percent today to 46 percent by 2021).
  • More employers are increasing the out-of-pocket costs for commonly overused and sometimes unnecessary services—adoption of this strategy stands to more than quadruple over the next few years (from 7 percent today to 35 percent by 2021).
  • Employers are also actively reviewing out-of-network coverage and costs. The number of companies reducing out-of-network reimbursements, eliminating non-emergency out-of-network coverage, or negotiating full disclosure of all related administrative costs could more than double by 2021.

"With greater access to accurate and transparent data, employers can create value-based designs that make a smaller dent in employees' wallets and a big impact on their health," added Stone. "This value-based approach holds the promise of the best health results at the best price."

3. Enhance employee emotional wellbeing. As employers look to cut costs while enhancing their population's wellbeing, mental and behavioral health ranked the highest as the top clinical area of focus over the next three years, selected by two in three employers. The majority of employers are working to build full-blown strategies for a holistic solution to emotional health by redesigning their employee assistance programs to better address emotional and financial wellbeing (expected to jump from 33 percent to 74 percent in three years) and building an organization-wide behavioral health action plan (leaping from 25 percent to 68 percent in three years).

With emotional wellbeing such a pressing concern for employers, it is no surprise that a growing cohort of employers are adopting emerging strategies to detect and manage employee stress within a more holistic approach to mental health:

  • The number of employers that are measuring the stress level of their employees is on track to triple by 2021, from 16 percent to 53 percent.
  • Building on the 27 percent of employers that already offer apps to support sleep and relaxation, more than half (53 percent) will implement these programs by 2021, in order to enhance their employee emotional wellbeing. By addressing stress and anxiety before it becomes an expensive clinical need in their population, employers are making a small financial investment to keep costs low down the road.

"Looking at emerging strategies and solutions shines a light on things to come," said Regina Ihrke, senior director and co-leader, Integrated Wellbeing, Willis Towers Watson. "Health care cost challenges are real and significant. However, from encouraging the use of biosimilars to creating an environment that makes it clear and easy for employees to opt for high-value services, and by engaging effective programs to help manage anxiety and stress, there are many worthy options on the table that can make a difference."

Source: CCH/Wolters Kluwer