Employer challenge: Manage health care costs without burdening workers

Inflation and a tight labor market are challenging employers to provide the best health care plans for their workers’ needs without further burdening those same workers with higher costs.

On top of that, workers are demanding their employers provide them with more support for mental health and a greater work/life balance.

Those were among the key takeaways from a webinar that presented the results of Mercer’s most recent national survey of employer-sponsored health plans. This marks the 37^th year in which Mercer measured health plan trends. The webinar also shared results from Mercer’s Health on Demand survey, which asked workers what they most want from their employers to support worker health and well-being and gave a sneak peek at the results of Mercer’s study of 2024 health and benefit strategies.

Health plan strategy reflects three major themes, said Beth Umland, Mercer’s director of employer research for health and benefits. Those themes are:

1. Inflation is driving health care costs and making affordability an even bigger concern.
2. Employers want to enhance benefits by providing inclusive benefits, flexibility and behavioral health care.
3. Employers are thinking about value when looking at increased cost growth.

Inflation and health care costs

Cost growth for health benefits lagged behind the rate of inflation in 2022, but sharper increases are expected in 2023 and beyond, Umland said. She said the Mercer survey results showed the total health benefit cost per employee increased by 3.4% in 2022 despite record-breaking inflation nationwide.

One explanation for the relatively modest increase is that while COVID-19-related claims were lower in 2022 than they were in the previous year, health care usage in general returned to pre-pandemic levels, she said. But another reason is timing - health care providers typically have multiyear contracts with health plans so in 2022, rate increases hadn’t caught up to that sharp and sudden rise in inflation.

Per-employee cost of health benefits topped $15,000 in 2022, Umland said, with smaller employers (those with 50 workers or less) spending more per employee than did employers with 500 or more workers. The remainder of the data presented in the webinar pertained to employers with 500 or more workers.

Prescription drug costs are taking a bite out of employer health plans, Umland said, with specialty drugs driving the cost of prescriptions at nearly twice the rate of overall health benefit cost. The cost of all prescription drugs in employer health plans rose by 6.4% between 2021 and 2022, with the cost of specialty drugs in those same plans increasing by 9.5% during that same time period.

Employers’ changing strategies

Each year, Mercer asks employers about their most important strategies for health care over the next 3-5 year. For 2022, the majority of employers (85%) said their top strategy is enhancing benefits to improve employee attraction and retention. This was a change from the usual top strategy, which is managing high-cost claimants and was cited by only 78% of employers as being the top strategy for 2022.

Rounding out the top five strategies were expanding behavioral health care access (73%), improving health care affordability (68%) and managing specialty drug costs (66%).

Employers will continue to prioritize enhancements to workplace benefits while minimizing cost-shifting to workers, Umland said. She said the survey showed 64% of employers plan to enhance benefits in 2024 while 48% will not raise any cost-sharing.

Filling health care gaps while boosting affordability

The survey showed employers using three strategies to boost health plan affordability, said Tracy Watts, Mercer senior partner and national leader for U.S. health care policy.

1. Helping employees keep more of their paychecks. Fifteen percent of employers are offering free employee coverage in at least one workplace plan, she said, while 18% are using salary-based employee contributions.
2. Removing financial barriers to seeking care. Nearly 40% of employers are offering a low/no deductible health plan.
3. Providing cash to help pay for health care. Six percent of employers make larger health savings account contributions for low wage earners.

Workers concerned about health equity

Health equity starts with affordability, but some workers are less confident they can afford needed care, Watts said. She said the survey showed a gap in worker confidence about affording care.

• 34% of those below the household median income were not confident they can afford care, versus 7% of those above the household median income.
• 29% of women are not confident they can afford care, versus 10% of men.
• 28% of part-time workers are not confident they can afford care, versus 17% of full-time workers.

Watts said she is encouraged that 78% of employers reported they are taking action to improve health equity. She said those employers are using a number of strategies to achieve that, including understanding the problem, respecting employee differences, providing coverage that meets diverse needs and committing to ambitious goals.

Addressing health care costs by thinking value

To address rising costs without shifting costs, employers are thinking more about value, Watts said.

Employers are using several strategies to slow cost growth without saddling workers with higher costs, she said. Some top strategies include:

• Programs aimed at enhancing the management of specific health conditions.
• Focused actions to manage specialty drug costs.
• Greater focus on virtual care options beyond standard telemedicine.

Paid time off

Employees are rethinking how they view work/life balance, and paid time off is an important part of that, said Richard Cooper, Mercer partner.

He said the survey showed one in four employers offer unlimited PTO to at least some of their workers. In addition, paid parental leave is becoming more inclusive, with 70% of employers offering paid adoption leave, 40% offering paid foster child leave and 25% offering paid surrogacy leave.

Employers also are taking a broader view of bereavement leave, he said. Nearly all employers (97%) offer leave for the death of an immediate family member, but 68% offer it for the death of a family member or a friend, and 57% offer it for miscarriage or stillbirth.

Behavioral health care in focus

Nearly half of U.S. employees (49%) report feeling stressed in everyday life, and their employers are taking notice, said Christine Schulze, Mercer principal behavioral health consultant.

In a Mercer survey of 4,000 workers, mental health ranked fifth out of 16 personal concerns. But mental health was in second place among concerns for workers age 35 and younger, female caregivers and LGBT workers.

When asked what their employers could do to improve worker mental health, the survey respondents’ top three answers were:

1. Reducing workload.
2. Enhancing employee assistance programs.
3. Increasing access to mental health apps.

Employers are taking action to enhance workers’ mental health, Schulze said.

• 67% are providing enhanced EAPs.
• 62% are adding online resources such as apps and classes.
• 35% are training managers to recognize employee behavioral health issues and direct workers to resources.
• 26% are conducting behavioral health anti-stigma communications campaigns.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.

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Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].