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Employer healthcare costs on the rise: How to manage claim costs

Published on October 8th, 2019 by Triton Benefits & HR Solutions

Toward the beginning of 2019, a survey of midsize to large organizations discovered that rising healthcare costs – including high-cost claims – was the top concern for employers. At the time, researchers projected a more than 4% increase in the cost of employer-sponsored health benefits.

Now, it seems this trend is set to continue into 2020, with new research from varying sources forecasting rises in medical costs spanning 3.5% to as much as 6.5%. As the Society for Human Resource Management pointed out, this spike in cost has employers looking at ways to reduce their expenses while still ensuring that staff members have access to the care and services they need.

How much will employer health costs increase?

SHRM contributor and industry expert Stephen Miller gathered research from a number of different sources, all of which are projecting a somewhat significant rise in employer health care and benefits costs next year:

  • Nonprofit National Business Group on Health projects that costs will rise 5-6% in 2020. According to its Large Employers' Health Care Strategy and Plan Design Survey, which included 147 employer respondents, health care costs are set to increase from $14,642 per employee in 2019 to $15,375 per employee next year.
  • PwC provided a similar forecast of a 6% increase in medical care costs, a modest increase from the past two years' 5.7%.
  • Triton Benefits & HR Solutions predicted that costs will rise between 3.9% and 4.2% for employee healthcare in 2020.

An increase in healthcare costs isn't unique to large businesses – while enterprises typically cover around 70% of care costs for their employees, small businesses typically expend around 8-18% more, according to SHRM.

Managing rising costs: Strategies for success

As Miller pointed out, this rise in cost is something employers have been dealing with for the previous few years, and at this point, has become somewhat predictable. Although this year's increase is certainly smaller than the rise in healthcare costs experienced by employers during the early 2000s, the increase does outpace general inflation.

In this environment, employers are looking for approaches to help reduce costs without carving into available benefits.

"Employers are taking a more active role in managing health care costs," PwC stated in its report. "For example, they're negotiating prices themselves, setting up provider networks and even building a parallel health system to take care of employees at more manageable costs."

Although some of the first cost-cutting options many employers investigate involves cost-sharing or shifting a higher percentage of medical expenses to the employee, staff members have noted that they don't particularly appreciate this strategy. In fact, Miller reported that the number of employers that go this route are on the decline – next year, only about 25% of employers will offer consumer-directed health plans (CDHPs), which include a high-deductible health plan and a health savings account (HSA) or health reimbursement arrangement (HRA).

Instead, employers are looking to other strategies, including:

  • Telehealth options, or the trend of remote access to health care services through video conferencing, mobile apps or other portals. Next year, 82% of employers will provide telehealth services, including those for mental health counseling, physical therapy consulting and more.
  • Pharmacy and prescription drug benefits, encompassing approaches like encouraging the use of generic or biosimilar drugs, as shifting coverage to better support doctor's office prescriptions as opposed to those requiring outpatient hospital services.
  • Prior authorization structures which requires employees to ensure that medical care is fully necessary before heading in for treatment.
  • Nurse advice lines to enable callers to get expert healthcare answers without having to visit a health care institution or doctors office.

Overall, organizations need to ensure that their cost-cutting strategies don't put employee benefits and health services in jeopardy, and workers can still access the care and assistance they need.

To find out how you can reduce your organization's healthcare costs and how services from an expert employee broker services provider can help, connect with us at Triton today.

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