The coming year is expected to usher in better news for U.S. workers when it comes to their health care costs, according to a new actuarial analysis by Aon plc, the leading global professional services firm providing a broad range of risk, retirement and health solutions. In 2018, health care premiums rose 3.5 percent. However, employers passed along a lower 2.2 percent premium increase to employees, absorbing a larger 3.9 percent increase to company costs. Aon’s analysis found that after plan design changes and vendor negotiations, 2019 medical and pharmacy plans premiums are expected to increase by 3.5 percent, the same percentage as 2018.
“Leading employers are increasingly concerned about the affordability of medical costs and the overall wellbeing of their employees,” said Stephen Caulk, Senior Vice President and Chair of Aon’s Trend Committee. “Couple that with low unemployment numbers, companies are turning to a variety of strategies to attract and retain talent, including rethinking how they manage health care cost increases. It’s no surprise that employers are turning away from shifting costs to employees to addressing the underlying drivers of cost increases.”
The projections are based on data from Aon’s Health Value Initiative database, which captures health care cost and benefit data for 497 large U.S. employers representing 10.9 million participants, more than 1,260 plans and $62.5 billion in 2018 health care spending. Aon’s analysis is the result of the leading analysis of actual employer-based health plan results of its kind.
For 2018, the increase in employees’ contribution to the cost of their health plans was held to their lowest level over the last five years. The combined increase in what employees contribute to the cost of the health plan through contributions from their paychecks and the costs at the point of service (or doctor’s office) is 1.6 percent in 2018. In 2019, these costs are expected to increase slightly over their 2018 levels.
Employers move from shifting cost to managing costs
Employers are increasingly looking to manage cost increases through means other than shifting cost onto employees.
“Historically, employers have had limited tools to understand the variability in cost and quality in their markets,” reports Todor Penev, Senior Vice President and Innovation Leader at Aon. “Employers can now identify opportunities to develop local provider strategies that improve quality and lower costs, enabled by solutions such as Aon’s Provider Optimization Initiative.”
Other strategies employers are using include:
- Personalized provider navigation and transparency solutions, such as Aon’s Provider Optimization solution, to help patients find high-quality cost-effective care locally or appropriate digital health and telehealth solutions based on the need.
- Programs aimed at impacting chronic conditions. Aon’s research shows half of employers are considering adopting condition-specific high performance networks over the next three-to-five years.
- Adopting Center of Excellence (COE) strategies for certain non-transplant procedures (29 percent of employers have one today, and another 51 percent are considering it in the near future).
- Offering integrated delivery models (patient-centered medical homes or ACOs) to improve care delivery effectiveness (15 percent offer one today and another 54 percent are currently piloting them).
- Impacting the overall efficiency of the care delivery system by challenging the way employers pay for services and exploring options for value-based arrangements. Aon’s research shows that 20 percent of employers offer value-based insurance design approaches, and another 59 percent are considering doing so in the future.
- Managing vendor costs by entering into purchasing coalitions for prescription drugs or direct contracts with providers.
Prescription Drug Market Changes
The pharmacy market is also shifting to address the cost and transparency of drug pricing practices. Traditionally, rebates were a relatively small portion of the total cost of branded products. Over the last five years, rebates have become a substantial portion of these costs and have been integral to lowering drug cost trends. Recently, there has been a growing interest into how much of those rebates are truly passed on to plan participants at the point of sale and we expect further transparency into the entire pricing structure of market participants, including drug manufacturers and pharmacy benefit managers (PBMs) .
“The combination of high drug prices, high brand inflation, increased rebate value and a pipeline filled with expensive specialty medications is causing pressure to mount for a change in how plan sponsors pay for prescription drugs,” reports John Malley, Senior Vice President and Pharmacy leader at Aon.
Suggestions to address this are focused on PBMs pushing for drugs to launch at lower list prices, removal of rebates from safe-harbor, tighter controls on drug inflation, and increased support for patients to afford costly medications.
Malley added, “The consolidation of healthcare agents through mergers and acquisitions is indicative of a mature market and shifting of the drug purchasing paradigm from unit costs to total cost of care. While we do not expect any immediate shifts in how prescription drugs are paid for today, vertical integration between PBMs and health plans in the longer term, could change the way drugs are managed. The heightened focus should be on efficacy, adherence and overall affordability.”