Employee Healthcare Costs Are Going Up Again – Here’s What Employers Can Do to Fight Rising Expenditures

Health care benefit costs to employers are going up again – at roughly three times the inflation rate. That’s the conclusion of a new study released by the National Business Group on Health, an association of large American employers. The survey polled 133 large employers nationwide. As a group, the 133 employers were sponsoring health employer health plans to more than 15 million people.

These large employers reported that they anticipate an average cost increase of about 6 percent for 2017, compared with an annual inflation rate of 2 percent. The six percent in nominal cost increases is roughly even with premium increases over the last two years, assuming no substantial changes were made in plan design.

Corporations offering group health insurance plans seem to be having much more success in containing costs than those buying insurance in the individual market, says NBGH chairman Brian Marcotte: “Current estimates have health insurance premiums for the average public exchange plan increasing by at least 10 percent – about twice what large employers are projecting next year,” he said. “This is a clear indication that the employer-based health care model continues to be the most effective way to provide health insurance coverage to employees and their families.

What’s driving the substantial growth in health benefit costs to employers? The large employers surveyed report that the main culprit is spending on prescription drugs. 31 percent of respondents reported that specialty pharmacy expenditures was primary contributor to higher health care costs for employees – a big change from the 6 percent who reported that in 2014.

Other factors include high-cost claimants and high cost medical conditions, including chronic musculoskeletal conditions. 

What Companies Are Doing To Combat Rising Health Care Costs 

Naturally, corporations are on the lookout for ways to reduce the cost of providing health benefits to employees. Among the most commonly pursued strategies for reducing health benefit costs:

Pharmacy management techniques. Examples include requiring prior authorization before filling a prescription, imposing quantity limits, requiring less expensive drug alternatives or generics, requiring mail order fulfillment for maintenance conditions, and waiving co-pays for certain generic medications. 

Consumer-directed health plans (CDHPs). More than 8 out of 10 large employers currently offer at least one CDHP to plan members as of 2016, and about one in three offer no choices to employees except a CDHP.

Out of those employers who offer CDHP, 92 percent of them offer a health savings account. About a third of them link HSAs with health reimbursement arrangements. 85 percent of employers make contributions. The median contribution among these large contributors was $600 per year for employee only coverage and $1,100 for family coverage. Employers were funding health reimbursement arrangements somewhat more generously, with HRA contributions for employee coverage rising to $725 on average, and $1,325 for family plans. However, unlike HSA assets, HRA assets revert back to the company when an employee leaves service.

Cost Sharing. Overall, plan sponsors paid about 78 percent of health care premiums on employees’ behalf – an amount that has remained relatively stable over the previous five years

Telehealth. Fully 90 percent of those large employers surveyed will be making telehealth services an option in any states where it is allowed in 2017.  By 2020 telemedicine will be a reality at nearly all large employers surveyed.

Companies are also expanding wellness programs, such as offering incentives or premium discounts for employees who quit smoking or make measurable gains fighting obesity, high blood pressure and other medical conditions.


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