How Employers Plan to Manage Healthcare Costs in 2020: A Detailed Report

First Stop Health’s inaugural 2019 Health Benefits Cost Containment Report found that reining in benefits spending is a top priority for employers, but many lack the data necessary to make effective changes, according to results of a survey of human resources professionals.

Healthcare spending has become a growing concern, as CMS predicts national health spending growth to average 5.5% per year through 2027, which is at least double the projected gross domestic product growth for the same time period. With unemployment rates reaching a 50-year low of 3.5% in September 2019, competition has risen amongs companies to offer appealing benefits. While employers are aware of healthcare costs at their companies, this heightened competition has caused healthcare spending to increase exponentially to attract and retain employees.

The study authors highlighted the fact that understanding which benefits do and do not attract employees is vital for employers. “In this benefits environment, employers must understand 2 things: first, the value and impact of benefit strategies, particularly when competing for talent; and second, the benefits their employees actually value and use,” said the study authors.

Researchers surveyed human resources professionals from 155 companies, with employee numbers ranging from 500 to more than 25,000, to examine the benefits offered, cost savings, and return on investment (ROI). The study found that nearly half of employers (45%) chose managing their companies’ benefit costs as their top priority, with 22% of employers saying that their priority is to improve employee health and wellness. Only 10% of employers cited the management of their employees’ share of benefit costs as their top priority, emphasizing the fear of being cast out by a competitive market.

Researchers found that 30% of employers are maintaining their current strategy and not planning to offer any new benefits next year, compared with the 40% of employers planning on modifying their employer—employee split on healthcare costs as a cost management strategy. Employers are also turning to the use of telemedicine (35%) and claims analysis (35%) to manage benefits cost.

In the survey, most employers admitted that they often do not measure the effectiveness of the benefits they offer, and many believe that most of their employees do not understand the value of these benefits. Many employers offered a wide variety of benefits, such as flexible spending accounts and mental/behavioral health services, but by not being able to analyze which benefits cater to their employees' demographics, employers continue to be exposed to rising healthcare costs.

In an interview with AJMC^®, David Guttman, MBA, president of First Stop Health, stressed, “If you can’t measure it, you can’t improve it. The report shows that employers find it difficult to measure the impact of their benefits. In fact, less than half of employers surveyed measure the ROI of most benefits.” As measuring ROI is paramount to delineating value of benefits for employers, Guttman notes that it’s impossible for many to know whether a benefit is actually working for a company.

When asked how employers should approach managing their health benefit costs, Guttman highlighted the fact that employers must be persistent and maintain a pulse on the marketplace while also placing accountability on vendors or partners to help them deliver positive ROI. “Employers should continue to look for innovative, unique solutions. Not every shiny new benefit will improve outcomes and produce ROI, but one could be a golden ticket,” said Guttman.

“Our report shows that 39% of employers are staying the course and not adding a new cost-management benefit in the next 12 months. If their current benefits strategy is working—that’s great. But as we know, many employers and their employees are struggling to manage healthcare costs,” said Guttman.