7 ways employers are taking action to tackle high health care costs

Two out of three U.S. employers plan to prioritize controlling rising health care benefit costs over the next three years. And with many employers expecting costs to rise steadily in the foreseeable future, they are pursuing several initiatives to manage costs and make benefits more affordable for employees.

Those are two key takeaways from a new survey by WTW, a global advisory, broking, and solutions company, that included responses from 455 U.S. employers collectively employing 8.2 million workers.

The survey also found that U.S. employers project their health care costs will jump 6% in 2023, compared to an average 5% increase this year. And most employers see little relief in sight, as seven in 10 expect moderate to significant increases over the next three years. Additionally, over half of all respondents expect their costs will be over budget this year. On top of managing costs, 42% cite managing employee affordability as a top priority.

To address a higher-cost environment, 52% of employers surveyed will implement programs or switch to vendors that will reduce total costs; one in four, however, plan to shift costs to employees through higher premium contributions.

“With no end in sight to projected cost increases, the need to manage health care costs and address employee affordability has never been greater,” Courtney Stubblefield, Insights and Solutions leader for Health & Benefits at WTW, said in a statement.

Employers take action

Here’s a rundown of some actions taken by employers this year to manage costs and enhance employee affordability.

• Health plan budget boost: Two in 10 employers added dollars to their health care plan without reallocating funds from other benefits or pay. Another 30% expect to do so in the next two years.
• Defined contributions: Four in 10 employers reported using a defined contribution strategy with a fixed dollar amount provided to all employees that differs by employee tier. Another 11% are planning or considering doing so in the next two years.
• Employee contributions by income evaluations: The number of employers that examine employee health payroll contributions as a percent of total compensation or income as the basis for benefit design decisions is expected to more than double from 13% this year to 32% in the next two years.
• Contribution banding: Nearly 30% structured payroll contributions to reduce costs for targeted groups, such as low-wage employees, or by job class. Another 13% are planning or considering doing so in the next two years.
• Low-deductible plan: Three out of 10 offered a plan with low member cost sharing this year; another 7% are planning or considering doing so in the next two years.
• Concierge navigation: Two in 10 offered concierge navigation, even if it requires movement from a full-service health plan to a third-party administrator. Another 25% are planning or considering doing so by 2024.
• Voluntary benefits: Over a third of respondents added or enhanced voluntary benefits and vendor solutions in case of a catastrophic event. Another 27% are planning or considering doing so by 2024.

“Employers that act now to predict, plan, and implement solutions and strategies that balance employee affordability objectives with escalating prices can avoid having to take desperate measures in a rising health care cost environment,” said Tim Stawicki, chief actuary for Health & Benefits at WTW.