Plan sponsors: plan for and manage new health care cost drivers

Inflation, a changing workforce profile, and a return to the doctor’s office are the latest active ingredients giving employer-sponsored health plan managers recurring headaches. Of course they add up to increased costs for the sponsor. But if these factors cannot be controlled, sponsors can at least be planning for, and managing, these new cost drivers.

That’s the advice from the experts at Marsh McLennan Agency (MMA), a unit of the global consulting firm. The firm gathered intelligence from within and without its domain in an attempt to guide plan sponsors through what will surely be at least six months of cost uncertainties.

The agency cites “the return of deferred utilization” as perhaps the most predictable and manageable of the factors. Plan members who avoided medical offices and procedures during the pandemic are now storming back, seeking care that was delayed for two to three years. The results are bound to boost claims across all health plans.

“As the number of medical visits picks back up in the remaining months of 2022 and into 2023, we are likely to see an increase in the severity of newly diagnosed patients and increased complication rates for those with existing chronic conditions,” the agency says in its report.

Two trends that emerged during the pandemic — greater telehealth use and demand for more mental health services — will likely have divergent effects on plan costs. MMA says telehealth and related remote medical services are here to stay and should have a mitigating impact on plan costs. There could be an initial cost increase associated with remote care, however.

“… The increase in utilization [of telehealth] also comes with the need to share patient data with multiple providers. Health care data is highly sensitive and sharing it amongst providers can be a nuanced process. While each situation is unique, in general, decreases in coordination of care can also increase costs,” the report says.

Meanwhile, many plans, responding to member requests, added mental health treatment coverage to the benefits package during the pandemic. Studies show that plan members did indeed take advantage of such services, and Marsh McLennan says it is unlikely utilization will significantly decrease.

Bottom line: Members are going to be making more claims after deferring during the pandemic, and sponsors should be preparing for the spike.

Inflation could drive up costs throughout a health plan. The good news: The federal government’s attack on inflation seems to be getting results. The bad news: Inflation has already led to cost/price increases that will drive up total health care spend.

Inflation has already led to larger-than-usual compensation increases as employers, battling for top talent, quickly responded to the early waves of inflation by sweetening salary and benefits packages. Health care systems were among those employers who had already been struggling to staff up. And while MMA says that hospitals and other providers are almost back to pre-pandemic employment levels, that staffing up came at a cost – one that will trickle down to health plans.

Medical equipment cost increases, driven by supply chain bottlenecks and inflation, also must be shared by plan sponsors. Planning for inflation has become a lost art after decades of price stabilization. But this would be a good time to resurrect those practices, MMA says. Just in case our government can’t rein it in.

“In general, it’s becoming more difficult to suppress increases for all expenses. However, it remains to be seen how effective the measures the government has implemented to date will be to curb inflation. The longer the elevated levels remain the larger the impact.”

The workforce demographic is bound to shift in the coming months as employers and workers respond to inflation and the economy’s buoyancy. If we enter a true economic downturn, employers will be forced into layoffs. That would almost certainly trigger a claims spike by those exiting the company. And even the shadow of a downturn could cause workers near retirement to rethink sailing into the sunset.

Perhaps a likely scenario is a mix of layoffs as a first defense against a downturn, combined with a growing reluctance for older workers to retire. The effect on the workforce: The worker profile ages. The effect on the health plan: The older workforce generates more claims.

“It is imperative that employers leverage high-cost claimant management best practice strategies that focus on care optimization, cost-containment, stop-loss, and employee support, to mitigate health plan financial risk and improve outcomes for members,” says Garrett Gomez, Marsh McLennan Agency’s director, Actuarial & Underwriting, Employee Health & Benefits Division.

The employer can’t control inflation, or whatever legislation may emerge from Congress that could further complicate managing a health plan. But employers can set aside extra funds to offset anticipated claims spikes and overall cost increases. They can review their benefits package to ensure it is aligned with their workforce profile. And they can continue to incentivize plan members to utilize preventative care that will reduce claims and improve productivity over time.