September 06, 2023
Amid rising health care costs, employers are navigating a delicate balance between managing health plan costs and ensuring a positive employee experience. As part of this balancing act, some employers are maintaining current benefit offerings and/or cost-sharing arrangements for 2024 to manage internal change fatigue, while others are making targeted changes to control rising costs, boost utilization and maximize the value of the investment for specific offerings. While most employers on the call anticipate absorbing the bulk of rising health care costs in the upcoming year, many recognize that this is an unsustainable long-term strategy.
The following recap summarizes how employers will strategically manage their health care plans and costs in 2024.
Health care delivery in 2024 is a balancing act of managing costs and employee desires, while also managing change fatigue.
Many employers are keeping health care benefits stable in 2024 in an effort to manage pressure from employees while balancing increasing costs. For some, keeping benefits stable means holding costs flat, while for others, it means continuing to offer the same robust benefits package. Few employers indicated they are able to hold both costs and plan design changes flat. According to Business Group on Health’s 2024 Large Employer Health Care Strategy Survey, the projected health care trend for 2024 is 6.9% before plan design changes and 6% after plan changes. Several employers on the call indicated that they aim to absorb the majority of rising health care costs in 2024 to shield employees from those increased costs. This strategy is especially important in light of employer sensitivity toward financial pressures in the macroeconomy coupled with rising inflation. In addition to addressing employee and macroeconomic pressures, total rewards and benefits teams continue to face internal financial constraints. Many are balancing rising labor costs with the need to recruit and retain top talent through a robust benefits package. Leading employers are taking a proactive approach to show the value of programs already in place while strategically reframing proposals for new benefits to emphasize their potential value.
Most employers on the call expressed the importance of ensuring that health care offerings remain affordable. When polled, a majority of participants indicated that their companies do not conduct wage-based cost-sharing analyses when considering health care increases for the upcoming year. One employer stated that from their perspective, wage-based premiums may not be equitable for all employees, as some companies may not have full insight into an employee’s total household income if they are not the sole employer for covered individuals in an employee’s household.
Some employers are reassessing their health and pharmacy plan design strategies and plan to make changes for 2024.
To manage cost increases for the upcoming plan year, some employers are looking at vendor management and contracting. Business Group’s 2024 Large Employer Health Care Strategy Survey shows that 19% of employer respondents plan to make changes to health plan partners in 2024, while 38% intend to make changes to other health and well-being vendors. This sentiment was echoed by employers during the call. In addition to partnership realignments, some employers are pulling various levers in their health and pharmacy plans to alleviate costs. These changes vary in scale, from incremental adjustments to more substantial transformations. For example, one employer noted that the company is transitioning to a three-tiered plan to drive employees to high-value care providers. Another employer said that it is proactively increasing the deductible in its high-deductible health plan (HDHP) to $2,000 per employee/$4,400 per family, a slightly higher amount than what’s required by law, to avoid consecutive deductible increases year over year. While many employers are keeping plan design changes to a minimum for 2024, some are already beginning to consider changes for 2025/2026. For example, one employer indicated that it will reevaluate its full replacement CDHP strategy to determine if it’s still the right strategy for them.
In addition to health plan changes, some employers are making targeted pharmacy changes. Business Group’s 2024 Large Employer Health Care Strategy Survey data indicates that the pharmacy cost trend is anticipated to increase by around 9% in 2024 before plan design changes and 8.8% after changes. Employers mentioned a variety of tactics they’re considering, including alternate formularies, lower rebate formularies, copay maximizer programs, additional prior authorization measures and more. Many employers mentioned specific measures related to GLP-1s, including prior authorization methods, to ensure that the prescription matches the diagnosis. Although pharmacy is top of mind, some employers noted that they are delaying decisions until next year, allowing them more time to consider the impact on employees.
Employers are focused on condition-specific programs to support and improve the health and well-being of employees and their families.
Business Group’s 2024 Large Employer Health Care Strategy Survey reveals that cancer, musculoskeletal, cardiovascular diseases, diabetes and mental health are the top conditions driving employer health care costs. Employers on the call reinforced that they are focused on supporting employees diagnosed with these conditions while also managing the overall cost of care. Employers have invested in numerous programs to address these conditions, including centers of excellence (COEs), telemental health, screening and early detection services, day-to-day condition management, virtual physical therapy programs and lifestyle coaching. While employers continue to invest in these solutions, a few noted that they plan to revisit their offerings, including reassessing COEs, putting mental health back into the health plan (e.g., carve-in) and launching RFPs for point solution vendors. Some employers noted that while there is a need to address many of these top conditions, there is also concern about the ballooning number of third-party vendors added to the health care ecosystem, as well as about the ROI for some of these solutions.
In addition to investing in programs, employers are considering how to creatively communicate about programs in place to maximize engagement and effectiveness. For example, one employer noted that it plans to launch a cancer-specific communication campaign, while another employer partnered with its communications team to create a “one-stop shop” resource that incorporated information on all the mental health resources offered by the company. Others have created personalized communications and targeted home mailers to encourage employees to get their preventive screenings, especially those who have not recently had them. Employers are also considering how to communicate to dependents more effectively, as many indicated that dependents play a significant role in driving a large portion of overall spend in some of these condition categories (e.g., diabetes).
Looking beyond 2024: Employers are anticipating the next iterations of technology that will influence their plan design strategies to support employee health and well-being.
As employers look toward 2024 and beyond, they are increasingly interested in the potential of artificial intelligence (AI) to transform their health care engagement and communications strategy. Some employers already have plans to incorporate this new technology into existing benefits, such as utilizing chat bots in their employee benefits portal to assist employees in finding the right resources at the right moment. Given that this technology is still evolving, employers are curious about the impact of different vendors’ emerging AI solutions on their own companies and on the broader benefits ecosystem.
As 2024 nears, employers are assessing how to manage costs within their health plans while also meeting employee needs and avoiding change fatigue. Employers are investing in condition management programs for employee populations and fine-tuning how to effectively communicate and engage employees and their dependents in the plethora of options offered. While the change happening now may appear incremental, it is clear that employers are concerned about ever-increasing health care costs and reinforcing the value of their health and well-being benefit offerings.