Three Tactics for Controlling Future Health Plan Costs

A recent post reported medical cost trend is predicted to be 6.5% in 2018, typical of the last several years. Yet, healthcare continues to take up a larger part of the economy. Resulting in a new healthcare economy reality that has perhaps pushed utilization as low as it will go and medical prices that are continuing to grow.

Last week, we looked at some of the key drivers behind rising Medical Cost Trend, and today, we would like to look at some employer strategies to address costs.

So where does that leave employers looking to control benefit costs? Moving beyond a shift to high deductible health plans; employers need to find new cost containment strategies in 2018 and beyond.

Under potential new federal regulations associated with the proposed AHCA, employers would be exempt from the employer mandate penalty should they choose to not offer health insurance at all. Additionally, companies providing rich benefit packages would now not be subject to the Cadillac Tax until 2026. These type of changes would also mean employers could dedicate less resources to reporting and compliance requirements, which produces cost-savings in its own way for companies.

For the most part many employers recognize they are moving into a more competitive labor market period and understand the value that benefits play in attracting and retaining a quality workforce. PwC’s HRI Medical Cost Trend 2018 report outlines three areas employers should focus their efforts to make benefit costs sustainable in the long run.

Step-up Health & Wellness Tactics

Health and wellness strategies need to be taken to a new level. Experts recommend using biometric data and analytic tools to target health initiatives to the right people. Organizations need to move beyond a one-size-fits all approach and help specific populations understand how behavior choices, environmental factors and clinical interventions can impact their overall well-being and product the greatest health improvements and cost-savings.

Control Drug Spending

Employers need to dig deep into their claims data and identify what conditions and drugs are costing the most money. Organizations must work closely with their pharmacy benefit manager (PBM) to evaluate new therapeutics’ potential value compared to their cost to determine what may help employees the most. Formularies will then need to be restructured to provide more incentive to use these drugs and give more value to workers.

Consider New Provider Arrangements

Provider arrangements hold a key to potential savings for employers. Not wanting to decrease utilization, organizations can look to the supply-side of things and try new products with limited networks of providers recognized for delivering high-quality, low-cost care. They can also contract directly with centers for excellence to use providers for high-cost or high-risk procedures that are known best care sites.

All of these strategies require continued communication and education, as well as incentives to help employees understand and see the value of their healthcare decision-making.

Source:  PwC Health Research Institute. Medical cost trend: Behind the numbers 2018.