Employers Working to Avoid Big Jump in Health Costs Next Year

Reports say employees should expect more restrictions on prescription drug benefits in 2018.

U.S. employers can limit the increase in their health care costs next year to about 5 percent if they follow through on a mix of innovative and traditional methods of controlling employee health care expenses. If not, they could be facing a jump in health care costs closer to 7 percent in 2018.
That’s the lesson for the business community from two closely watched employer health care benefits surveys released over the past week.
The first is the Best Practices in Health Care Employer Survey conducted by Willis Towers Watson. The second is the 2018 Large Employers’ Health Care Strategy and Plan Design Survey conducted by the National Business Group on Health.
The Willis Towers Watson report is based on a survey of 678 U.S. employers with a total of 11.9 million employees. The employers said they expect their health benefits costs to rise by 5.5 percent next year after making changes to their health benefits. Without those changes, employers said their costs would rise by at least 6 percent.
The NBGH report is based on a survey of 148 large employers with a total of about 10 million workers. The employers said they expect their median health benefit costs per employee to rise by 5 percent next year to $14,156 after making changes to their benefits. Absent the changes, the employers said their costs would climb by 6.6 percent.
Employers surveyed for both reports pointed to drug costs—particularly the high price of specialty drugs—as a leading driver of health spending that needs to be curbed with changes in benefits design. Specialty drugs are complex medications often called biologics that are used to treat chronic medical conditions. By Medicare’s definition, they cost $600 or more for a 30-day supply.
Some 80 percent of the employers surveyed by the NBGH cited specialty drugs as one of the top three factors pushing their health care costs higher. That was followed by high-cost claimants (69 percent) and specific diseases or medical conditions (55 percent).
Asked to rate the most effective tactics to control health costs, the NBGH-surveyed employers ranked pharmacy management techniques that oversee specialty medications first with 55 percent saying it was one of their top three tactics. Third were pharmacy management techniques that oversee traditional medications, cited by 29 percent of the employers.
The employers surveyed by Willis Towers Watson identified the following tactics to control pharmacy costs and medication use:

  • 62 percent are evaluating the terms of their pharmacy benefit contracts with another 32 percent planning to do so by 2019
  • 60 percent have adopted new coverage or utilization restrictions on specialty drugs with another 24 percent planning to do so by 2019
  • 44 percent are addressing specialty drug costs and utilization through medical benefit changes with another 38 percent planning to do so by 2019

Of the specific techniques to control specialty drug spending, the NBGH-surveyed employers cited the following as their top three to be implemented in 2018:

  • More aggressive utilization management protocols (71 percent)
  • Requiring that specialty medications be obtained through a specialty pharmacy or specialty pharmacy department of a pharmacy benefit manager (68 percent)
  • Site-of-care management to ensure specialty drugs are administered in the most appropriate setting (44 percent)

“Controlling the costs of these new medications remains a challenge, and employers are implementing targeted approaches to mitigate costs where they can,” the NBGH report said.