Employers turn to alternative strategies to control health care spending

Employers expect health care costs to increase by 7.7% next year, up from 6.9% in 2024 and 6.5% in 2023. As a result, they are considering different approaches to promote employee wellbeing and hold the line on costs.

“The cost of health care has been rising steadily for years,” said Tim Stawicki, chief actuary, health and benefits, for WTW. “With cost increases reaching a post-pandemic high, companies are concerned about the burden it’s putting on their workforces, especially since it affects decisions about insurance coverage and care. To tackle high prices and other causes driving increased spending, companies are pursuing initiatives that are beyond cost-shifting.”

According to the 2024 Best Practices in Healthcare Survey from WTW, more than half of employers plan to implement programs that will reduce total costs, and just as many intend to adopt plan design and network strategies that steer workers to lower-cost, higher-quality providers and sites of care. Only 34% expect to shift costs to employees through premium contributions, and just 20% will promote account-based health plans or high-deductible health plans.

These initiatives are focused within the prescription drug space as well, with strong interest in alternative drug channels and pricing. Twenty-one percent of employers are planning for or considering promoting drug discount cards or direct-to-consumer prescription delivery to lower out-of-pocket costs in the next two years. Eighteen percent plan to allow members to purchase drugs through a retail or “cost-plus” outlet, and 17% expect to have an acquisition cost pharmacy benefit manager contract structure.

Other proactive efforts to control costs over the next two years include:

• Taking vendor or health plans out to bid, 43%;
• Evaluating employee assistance and mental health programs, 38%;
• Exploring narrow networks, 30%, and centers of excellence, 25%; and
• Considering new technology-enabled solutions for managing costs, with 54% exploring navigation or technology that shares provider price and quality information with members.

To support affordability and employee wellbeing, employers’ top focus areas are obesity and weight management, 40%; cancer and oncology, 34%; cardiovascular health, 28%; and women’s health, 27%.

Related: Rising costs, declining health: U.S. health care system in dire straits

Employers still are contending with the continued demand for high-cost weight-loss medications. Although most employers are maintaining coverage for obesity medications, with some restrictions, those not offering coverage today cite cost and safety as the biggest barriers. Employers are eager to consider safe and effective lower-cost alternatives. Nearly half expressed interest in compounded GLP-1 medications available through certain vendors at much lower costs.

“To navigate the current health care environment, companies need to proactively address cost challenges and implement effective risk-management strategies,” said Courtney Stubblefield, managing director, health and benefits, for, WTW. “By doing so, they can mitigate financial risks, support the wellbeing of their workforce and achieve long-term sustainability.”