Large Employers Trimming Healthcare Spending

Big companies are taking a broad range of actions to cut spending on employee healthcare benefits. That means higher costs for workers, a push for more consumer engagement, and greater use of telemedicine.

Large employers are facing a balancing act next year, simultaneously shifting healthcare costs to their workers and ramping up healthcare consumer engagement efforts, according to a National Business Group on Health survey of 400 companies.

During a press briefing Wednesday that unveiled the survey, NBGH President and CEO Brian Marcotte said 2015 marks a healthcare cost-cutting turning point for employers and workers. "If there is any year the employee is going to focus on the healthcare packet, this is the year," he said of the benefits enrollment season leading up to Jan. 1.

A key finding of the survey is the expectation among large employers that they will be able to contain the growth of 2015 healthcare costs to 5%. Overall healthcare costs are forecast to rise 7%, but employers expect their internal cost-cutting measures will pare 2%off growth in their healthcare spending.

Workers should expect the cost of their 2015 employer-sponsored healthcare coverage to hike about 5%, Marcotte said.

Large employers are using a range of measures to trim the costs of providing health insurance to their workers, the NBGH survey found. In addition to relatively traditional cost-sharing measures such as deductibles and co-pays, employers are increasingly turning to consumer-directed health plans and consumer "decision-support tools" to drive down healthcare costs, Marcotte said in an interview after Wednesday's press briefing.

The NBGH survey found tangible evidence that large employers are banking on engaging with their employees to drive down the cost of healthcare benefits.

More than half of the companies surveyed—57%—reported that they were either launching or expanding consumer-driven health plans in 2015. About a third reported that they are set to offer a CDHP as their only benefit plan next year.

Key Player is the Consumer
Consumer engagement is a key issue for the entire healthcare industry, according to Marc Scher, a partner at Amsterdam-based KPMG. "Accountability for your health is a really big deal," he said. "The best way to keep costs down is to keep people healthy."

Two weeks ago, KPMG released a survey of North American CEOs that included 61 top executives from the healthcare industry. The KPMG survey found healthcare executives more positive about growth compared to their peers in other industries, and "consumer engagement is inherently reflected in that perception," Scher said.

"Even in advance of the ACA, it was clear that we couldn't sustain ourselves in what was going on in healthcare," he said, adding that providing consumers with pricing and quality information has the potential to transform the healthcare industry. "It's not a comprehensive system today. Providers need to think about not only treating patients but also attracting patients… But the key player here is the consumer."

Now that consumers have "skin in the game," there is a growing expectation that financial incentives will help steer patients to best practices and create "more efficient and cost-effective care," Scher says.

Health plans with high deductibles and consumer-directed health plans are being used by employers to incentivize workers to take a more active role in their healthcare spending decisions, he says. "They may not actually be spending more money out-of-pocket, but they see the money go out," Scher said of workers in consumer-directed health plans.

Other NBGH Survey Findings

Skinny Plans −Next year, about one in six large employers plan to offer "skinny plans" to workers who fall short of the federal healthcare coverage requirements under the Patient Protection and Affordable Care Act. While acknowledging federal regulators and employers "are going to have to address" the potential for creating second-class health plans, Marcotte said there is a pressing need to find a way to offer affordable healthcare coverage to workers at businesses with tenuous profit margins. "The need for a skinny plan is real," he said. "Even in the new exchanges, they are looking at offering plans with benefits lower than the bronze plans."

Telemedicine −is being embraced by large employers. In 2014, about 28 percent of large companies offered telemedicine services, mostly to fill gaps in primary care for minor conditions, Marcotte said. The 2015 NBGH survey found 48 percent of large employers will be offering telemedicine services next year. "We're seeing an explosion in telemedicine," he said. "It's part convenience. It's less expensive for certain conditions. And, hopefully, it keeps people out of emergency rooms."

Drug costs −Large employers are alarmed over the growth rate of specialty pharmacy drugs such as chemotherapy treatments, with annual costs rising at about 20 percent. "What's going to help here is price transparency," Marcotte said.