U.S. employers expect health care costs to rise by 5.5% in 2018, up from 4.6% in 2017

Willis Towers Watson survey also shows that despite uncertainty about health care legislation, employer confidence in offering health benefits has reached pre-ACA levels

August 2, 2017 - Willis Towers Watson

ARLINGTON, VA, August 2, 2017 — Employers expect health care costs to increase by 5.5%* in 2018, up from a 4.6% increase in 2017, according to the 22nd annual Best Practices in Health Care Employer Survey by Willis Towers Watson (NASDAQ: WLTW). In the face of these continued cost pressures, including employee affordability, employers plan to step up cost management strategies over the next three years, including evaluation of emerging health care delivery solutions and improved patient navigation and health engagement.

The survey also showed that despite uncertainty about the future of health care legislation, employer confidence in offering employee health care benefits has reached its highest level since the passage of the Affordable Care Act in 2010. Ninety-two percent of employers said they are “very confident” their organization will continue to sponsor health benefits in five years.

“Cost management of health benefit programs remains the top priority for employers in 2017 and 2018,” said Julie Stone, a national health care practice leader at Willis Towers Watson. “While employers made significant progress over the last few years refining their subsidy and vendor/carrier strategies, many are now looking to other aspects of their health benefit programs in order to improve health and dampen future cost increases. Over the next three years, they will seek to improve patient engagement, expand the use of analytics, and efficiently manage pharmacy costs and utilization. Yet, with rising concerns about affordability, employers are challenged to keep costs low without overburdening employees financially.”

Employers are pursuing a wider array of approaches to reduce health care cost and risk – both through improved program efficiencies and members’ health engagement. These areas of focus will include encouraging patients to use preferred providers for health care delivery, e.g., telemedicine, centers of excellence, and high-performance networks; emphasizing better outcomes and cost savings in high-priority clinical conditions, such as diabetes, musculoskeletal health and mental health; and selecting partners based on their ability to achieve demonstrably improved outcomes, as well as hold the line on cost.

Employers also aim to enhance employee engagement by increasing choice of benefit plans, improving decision support, and offering health wearables and mobile apps.

Other key employer priorities over the next three years include:

Encouraging employees to use preferred health care delivery options:

• Telemedicine for office visits — 78% of employers currently use these consultations with another 16% planning to or considering to by 2019.
• Centers of excellence within health plans – 44% of employers currently use these centers with another 33% planning to or considering to by 2019.
• High-performance networks – 15% of employers currently use such networks with another 36% planning to or considering to by 2019.

Selecting carriers and vendors based on:

• Competitiveness of negotiated provider discounts: 94%
• Competitiveness of vendor’s network access: 94%
• Competitiveness of vendor’s total cost of care: 92%

Curbing pharmacy costs and utilization:

• Evaluate pharmacy benefit contract terms – 62% of employers are currently evaluating contract terms with another 32% planning to or considering to by 2019.
• Adopt new coverage or utilization restrictions as part of specialty pharmacy strategy – 60% of employers recently adopted these restrictions with another 24% planning to or considering to by 2019.
• Address specialty drug costs and utilization performance through medical benefits – 44% of employers currently do this with another 38% planning to or considering to by 2019.

Elevating employee health engagement through expanded choice and a more personalized experience:

• Add choice in benefit types by offering voluntary benefits – 66% of employers currently use this tactic with another 20% planning to or considering to by 2019.
• Create a virtual shopping experience at the time of enrollment – 24% of employers currently do this with another 26% planning to or considering to by 2019.
• Provide decision-support tools for health navigation – 55% of employers currently offer such tools with another 26% considering to for 2019.
• Encourage the use of mobile apps for condition management or health risk reduction – 19% of employers currently provide this to their employees with another 28% planning to or considering to by 2019.
• Promote wearable devices for tracking physical activity – 26% of employers currently promote these to their employees with another 18% planning to or considering to by 2019.

“Employers understand that there is no single strategy for success when it comes to health care, and it is critical to engage employees through education and communication that will create a win/win,” said Catherine O’Neill, a senior health care consultant at Willis Towers Watson. “The most effective health programs will include a broad range of strategies that encompass employee and dependent participation, program design and subsidy levels, and plan efficiency. The ultimate goal is to offer a high-value plan that manages costs for both employers and employees while also improving health outcomes.”

About the survey

The Annual Willis Towers Watson Best Practices in Health Care Employer Survey was completed by 678 U.S. employers between June and July 2017 and reflects respondents’ 2017 health program decisions and strategies. Respondents collectively employ 11.9 million employees and operate in all major industry sectors. Results provided are based on 555 employers with at least 1,000 employees.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees in more than 140 territories. We design and deliver solutions that manage risk, optimize benefits, cultivate talent and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas—the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

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