Health benefit cost will top $13,000 per employee this year, according to the annual Mercer National Survey of Employer-Sponsored Health Plans 2019, released today at the HLTH 2019 Conference in Las Vegas. The average total health benefit cost per employee grew 3.0% to reach $13,046, following a rise of 3.6% in 2018. This is the eighth consecutive year of health benefit cost growth in the low single digits, and employers expect cost to rise at a similar pace next year. Still, cost increases continue to outpace overall inflation (see Figures 1 and 2), and health benefit cost management remains an imperative for most organizations.
Workforce needs bring focus to affordability and choice
Diverse workforce needs are increasingly shaping health program design. When asked about their priorities for the next five years, 42% of large and midsize employers (500 or more employees) identified “addressing healthcare affordability for low-paid employees” as an important or very important strategy (see Figure 3). And in fact, in 2019 most large and midsize employers hit “pause” on requiring members to pay more out-of-pocket for health services as a way to hold down premium costs: The average individual deductible in a Preferred Provider Organization (PPO), the most common type of medical plan, rose just $10 in 2019, to $992 (see Figure 4). By contrast, the average deductible rose by more than $250 among small employers (10-499 employees), which typically have less ability to absorb high cost increases and fewer resources to devote to plan management.
Even more telling, some larger employers that had offered a high-deductible plan with a Health Savings Account (HSA) as the only medical plan reversed course and added a traditional PPO or Health Maintenance Organization (HMO) as an option. This trend was especially notable among employers with 20,000 or more employees: those offering only a high-deductible account-based plan fell from 22% to 16% (see Figure 5).
“This doesn't mean HSA plans are going away, but to meet the various needs and budgets of today’s five-generation workforce, employers are increasingly offering an array of health benefit plans,” said Tracy Watts, Mercer’s National Leader for US Health Policy. “In fact, many employees who do the math at open enrollment find an HSA is a smart financial move. But for those with little savings or significant health issues, another plan might be a better fit.”
Enrollment in high-deductible account-based plans rose from 33% of all covered employees last year to 36% in 2019 (see Figure 6). These plans are offered by 71% of large and midsize employers, up from 68% in 2018, and by 37% of small employers.
Innovative solutions empower employees to take charge of their health
As employers look for cost-management strategies that do not shift cost to employees, many are turning to innovative tech-enabled programs that help employees manage chronic conditions or other health needs, such as musculoskeletal conditions, infertility and insomnia. In 2019, 58% of all large and midsize employers, and 78% of those with 20,000 or more employees, offer one or more of such targeted health solutions.
“Typically the goals of these programs are empowerment, convenience and lower costs,” said Ms. Watts. “For example, a physical therapy app that reminds patients when to do prescribed exercises, provides instructions, and even counts reps could mean fewer trips to a clinic, less out-of-pocket cost for the employee, and a better outcome.”
The survey also revealed another surge in telemedicine, with nearly 9 out of 10 employers now offering a program to their members (see Figure 7). This tech-enabled service expands access to care and is designed to reduce out-of-pocket spending: Telemedicine visits are typically less than half the cost of an office visit. Utilization is growing, although slowly. Last year, among employers offering telemedicine, on average 9% of eligible employees used telemedicine, up from 8% the prior year (see Figure 7), and about one in seven employers reported utilization of 20% or higher. Very large employers are also betting on teletherapy, which is seen as a potential solution to shortages of behavioral health providers, particularly in rural areas. Teletherapy is now offered by 42% of employers with 5,000 or more employees.
Importantly, 41% of large and midsize employers say that all or most of their benefit offerings are accessible to employees on a single, fully integrated digital platform (most often through a smartphone app), up sharply from 34% in 2018. According to Ms. Watts, "It has to be easy to find these resources, or they won't get used. One-stop shopping has been the missing ingredient, and now it's finally here."
Innovative strategies to take on sky-high claims
Employers are using innovative patient-centered programs to address what is by far the biggest source of health plan cost: complex care. As medical science produces an unending stream of sophisticated new treatments and drug therapies, the incidence of high-cost claims is rising, driving up the cost of coverage for both employers and employees. Managing these high-cost claims is the top priority for employers over the next five years (see Figure 3).
Programs that provide intensive support and advocacy to employees faced with a serious medical issue can improve the patient experience -- and even care outcomes -- while lowering cost. The largest employers are taking the lead in offering enhanced health advocacy and intensive case management services, as well as programs that make it easy for members to seek an expert medical opinion on a diagnosis or their treatment plan (see Figure 8).
"Health advocates help patients and their families navigate a complex healthcare system to get to the right provider at the right time. When care is better coordinated, we often see less wasteful healthcare spending," said Ms. Watts.
High-cost specialty drugs, such as those used in cancer treatment, are often a factor in high-cost claims. While spending on all prescription drugs rose 5.5% in 2019 among large and midsize employers, spending on specialty drugs rose 10.5% (see Figure 9). Over half of all large and midsize employers (52%) and over three-fourths of those with 20,000 or more employees (78%) now steer employees to a specialty pharmacy, which typically provides enhanced care management. For example, some drug therapies can be administered at home at less cost and greater convenience for the patient and family.
The Mercer National Survey of Employer-Sponsored Health Plans is conducted using a national probability sample of public and private employers with at least 10 employees; 2,558 employers completed the survey in 2019. The survey was conducted during the summer, when most employers have a good fix on their costs for the current year. Results represent about 700,000 employers and about 124 million full- and part-time employees, with a margin of error of +/–3%.
The full report on the Mercer survey, including a separate appendix of tables of responses broken out by employer size, region and industry, will be published in March 2020. For more information, visit www.mercer.com/health-benefit-trends.
Mercer delivers advice and technology-driven solutions that help organizations meet the health, wealth and career needs of a changing workforce. Mercer’s more than 25,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a business of Marsh & McLennan Companies (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people with 76,000 colleagues and annualized revenue approaching $17 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.
All Figures sourced to Mercer National Survey of Employer-Sponsored Health Plans, 2019