Group Health Plan Trends for 2025

As health insurance costs continue to rise at an uncomfortable pace, employers in 2025 plan to shake up the status quo with their health care vendors, particularly those focused on reducing pharmacy spend, a main cost driver, according to a new report. 

To address spiraling costs, they will also focus on educating their staff about the importance of prevention and immunizations and guiding them to use specialized services that focus on managing chronic conditions, says the “2025 Trends to Watch” report by the Business Group on Health (BGH). 

Companies will also demand more data from their health plans and other health care vendors and look to float requests for proposals if they aren’t seeing results. 

Here’s a look at the main strategies employers told the BGH they were likely to pursue this year. 

Pharmacy spend

According to the report, if employers want to control their overall health care costs, they will have to address growing pharmacy expenditures, which now account for more than 25% of their health care budgets. 

That percentage is forecast to increase with the advent of GLP-1 weight-loss and diabetes drugs like Wegovy and Ozempic, as well as specialized costly medications that can bust a health plan’s budget. 

One-third of employers surveyed said they planned to revisit and reassess their pharmacy benefit manager relations, potentially holding new contract bids to get better pricing from current vendors or from new ones that offer competitive pricing and more transparency in their contracts. 

GLP-1s loom large. Some employers are only willing to cover these drugs for diabetes and other Federal Drug Administration-approved indications like heart disease. Few will cover them for weight loss unless the patient is obese and with diabetes. Even then, they may require step therapy before prescribing them, which includes: 

  • Trying other established and proven anti-obesity medications.
  • Engaging in lifestyle management programs. 

Chronic conditions

Besides rising pharmaceutical costs, chronic and serious conditions such as cancer, heart disease, diabetes and autoimmune diseases are major contributors to high health care costs. 

The report recommends a two-pronged approach to helping employees with chronic conditions: taking advantage of specialized integrated care networks, and wellness programs.

Specialty care — Many workers with chronic conditions are often not aware of the specialty care available to them through their health plan and as a result, don’t take advantage of these valuable services. The problem is that both employees and employers are often not aware of these specialty solutions that can improve staff health through care that provides valuable clinical support.

Employers surveyed by BGH said they would be focused on holding health plans, specialty insurance products and navigation partners accountable for helping their employees access this care. 

“The first and most critical step is to address the lack of awareness of these new network-based solutions among employers as well as employees,” the report states. 

Wellness plans — Chronic conditions are also prompting employers to revisit and evaluate their current wellness initiatives to ensure they are helping their employees manage these conditions and make lifestyle changes that can improve their illness. 

Employers may start requiring vendors to agree to outcomes-based contracts that set expectations for results. “These agreements should require that vendors demonstrate improvement in health outcomes and deliver promised returns,” the report states. 

The most popular wellness programs focus on helping employees lose weight and lead a healthier lifestyle through more exercise and healthy eating and habits. 

To be successful, weight-management programs should use best practices and integrate treatments like anti-obesity medications and mental health services in their care models, the report says.

Getting control of plan costs

Employers will look to hold their health plans’ and benefits vendors’ feet to the fire for producing better health results at lower prices. 

The key to this is employers having access to data from their health plans and other vendors that provides insights into cost and outcomes. This will be an evolving trend and some plans will be better than others in providing the desired information. 

“Transparency of cost, quality and outcomes data is critical to both employer and employee decision-making; vendors will need to show how they enable access to this information in 2025,” BGH says in its report.

Additionally, employers that have sway with their insurers will push their health plans to get control on unit prices they pay for services, and press them to accept value-based contracts that reward for positive outcomes and quality of care. 

Businesses that can afford it may contract directly with centers of excellence that provide very high quality or low-cost care, oftentimes for a particular service. 

The takeaway

We know that the high cost of health care is weighing heavily and we are here to help you keep your health plan costs under control. It requires an integrated approach of pushing wellness and chronic condition management among your staff and evaluating your current vendors’ results.

ACA Group Health Plan Affordability Level Up Sharply

The IRS has significantly increased the group health plan affordability threshold — which is used to determine if an employer’s lowest-premium health plan complies with the Affordable Care Act rules — for plan years starting in 2025.

The threshold for next year has been set at 9.02% of an employee’s household income, up from 8.39% this year. The higher threshold will give employers a little more wiggle room when setting their workers’ premium cost-sharing level for their lowest-cost plans in 2025, to avoid running afoul of the ACA.

Under the ACA, “applicable large employers” — that is, those with 50 or more full-time or full-time equivalent employees (FTEs)— are required to offer at least one health plan to their workers that is considered “affordable” based on a percentage of the lowest-paid employee’s household income.

If an employer’s plan fails this test, it will be deemed as non-compliant with the law, resulting in hefty penalties for the employer.

The new threshold will apply to all health plans whenever they incept in 2025. The affordability test applies only to the portion of premiums for self-only coverage, and not for family coverage.

Also, if an employer offers multiple health plans, the affordability test applies only to the lowest-cost option that provides also minimum value (another ACA plan metric).

Calculating

Employers can rely on one or more safe harbors when determining if coverage is affordable:

  • The employee’s most recent W-2 wages, as reported in Box 1.
  • The employee’s rate of pay, which is the hourly wage rate multiplied by 130 hours per month (at the start of 2022).
  • The federal poverty level.

Employers with a large low-wage workforce might decide to utilize the federal poverty level ($15,060 for 2024) safe harbor to automatically meet the ACA affordability standard, which requires offering a medical plan option in 2025 that costs your full-time employees no more than $113.20 per month.

If an employee’s coverage is not affordable under at least one of the safe harbors and at least one FTE receives a premium tax credit for coverage they purchase on an ACA exchange, the employer may have to pay a penalty, known as the “employer shared responsibility payment.”

The shared responsibility payment for 2025 will be $4,350 per employee that receives a premium subsidy on an exchange, down from $4,460 this year.

The takeaway

As 2025 nears, you should review your health plan costs and premium-sharing to ensure that your lowest-cost plan complies with the affordability requirement.

We can help you assess affordability to ensure you don’t run afoul of the law. It will be particularly crucial in 2025, considering the significant change in the threshold.

Medicare Changes Could Affect Your Group Health Plan

New Centers for Medicare and Medicaid Services rules that take effect Jan. 1, 2025 will significantly affect employees’ decisions on whether to continue staying with your group health plan while eligible for Medicare.

Under changes in Medicare Part D drug plan rules for 2025, once a beneficiary pays more than $2,000 out of pocket for prescription medications, Medicare will fully cover their prescription costs for the rest of the year.

Due to the rule changes, if your drug plan’s maximum out-of-pocket employee cost-sharing surpasses that amount it will not be deemed “credible” under CMS rules, and that would have long-term repercussions for your senior employees.

Why? If someone doesn’t purchase a Part D plan when they are first eligible for Medicare, they will face a 10% penalty on their annual premiums in perpetuity. That penalty increases for each year they fail to enroll in a Part D plan. 

There is a provision in the law for Medicare-eligible workers to stay on their employer’s group health plan if that plan provides at least as thorough a level of coverage as Medicare does. Those that do are considered “credible” coverage.

However, if an employee’s plan does not meet the new Part D rules, it may be considered “non-credible” and they would be subject to Part D penalties for failing to enroll in a credible plan.

What you should do

Employers are required to inform affected employees if their plan is credible or non-credible before Medicare Annual Open Enrollment starts on Oct. 15. This way, the worker is given time to elect or decline Medicare Part D coverage based on their employer’s group benefit plan’s prescription benefits and avoid possible penalties. You can find templates of those notices here.

If your current plan doesn’t meet their needs, please contact us to discuss strategies for designing one that caters to affected workers and fits with your company needs and budget. The second option is not to make a change, and to inform your Medicare-eligible staff that your plan is non-credible.

Finally, you should hold a meeting with affected staff to inform them of the changes and if any of the plans you offer comply with the new rules.

Call us so that we can gauge if your health plan, or plans, offer credible or non-credible drug coverage for your Medicare-eligible staff.

Group Health Plan Affordability Level Cut Significantly for 2024

The IRS has significantly reduced the group plan affordability threshold — which is used to determine if an employer’s lowest-premium health plan meets the Affordable Care Act rules — for 2024.

The threshold for next year has been set at 8.39% of an employee’s household income, down significantly from 9.12% this year. The lower threshold will likely require employers to reduce their employees’ premium cost-sharing level for their lowest-cost plans in 2024, to avoid running afoul of the ACA.

This is happening just as group health plan premiums are expected to climb at a much faster clip in 2024 than the last three years.

Under the ACA, “applicable large employers” — that is, those with 50 or more full-time or full-time equivalent employees (FTEs)— are required to offer at least one health plan to their workers that is considered “affordable” based on a percentage of the lowest-paid employee’s household income.

The lowest level yet

The new level is the lowest affordability threshold since the ACA took effect, and almost one-and-half percentage points lower than the 9.89% threshold in 2021. The new threshold will apply to all health plans when they incept in 2024. For plans that incept after Jan. 1, the 2023 threshold will apply and change to the new rate when they renew later in the year.

Employers can rely on one or more safe harbors when determining if coverage is affordable:

  • The employee’s W-2 wages, as reported in Box 1 (at the start of 2022).
  • The employee’s rate of pay, which is the hourly wage rate multiplied by 130 hours per month (at the start of 2022).
  • The federal poverty level.

Example: The lowest-paid worker at Company A earns $25,987 per year. To meet the 2024 affordability requirement, they would have to pay no more than $2,180 a year in premium (or $181 a month).

Employers with a large low-wage workforce might decide to utilize the federal poverty level ($14,580 for 2024) affordability safe harbor to automatically meet the ACA affordability standard, which requires offering a medical plan option in 2024 that costs FTEs no more than $101.94 per month.

If an employee’s coverage is not affordable under at least one of the safe harbors and at least one FTE receives a premium tax credit for coverage they purchase on an ACA exchange, the employer may have to pay a penalty, known as the “employer shared responsibility payment.”

The shared responsibility payment for 2024 will be $4,460 per employee that receives a premium subsidy on an exchange, up from $4,320 this year.

The takeaway

As 2024 nears, you should review your health plan costs and premium-sharing to ensure that your lowest-cost plan complies with the affordability requirement.

We can help you assess affordability to ensure you don’t run afoul of the law. It will be particularly crucial in 2024, considering the significant drop in the threshold.

Report: Group Health Plan Cost Inflation to Pick Up Steam

A new report by Aon warns employers to expect average group health insurance costs to increase 8.5% in 2024, as inflation starts hitting the cost of delivering care as well as pharmaceuticals.

The report predicts that employers will pay an average of $15,088 in 2024, compared to the average this year of $13,906. The cost hike is almost double the 4.5% increases employers saw in 2022 and 2023.

Despite the large expected premium increases, employers still seem to be reluctant to pass on more of the premium cost to their covered workers. For example, for this year, employees saw their premium payments increase an average of just 1.7%.

The challenge will be for employers to properly budget for these cost increases, while not pushing too much of the hike onto their employees, particularly in this highly competitive job market.

The cost drivers

There are a few reasons rates are climbing:

Health care inflation — This is the main culprit behind the expected rate hikes. While health care providers have been contending with inflation since 2021, they’ve been unable to pass them on to health insurers because they usually enter into three-year contracts with locked-in rate hikes.

As these contracts are renewed, health care providers are demanding higher fees for services due to their own costs increasing, particularly for staff wages, equipment and supplies. For example, the cost of emergency services supplies, including ventilators, respirators and other critical equipment, increased by almost 33% between 2019 and 2022.

New technologies — New technologies that hospitals use are also increasing in cost, as is the cost of servicing and installing the equipment.

Catastrophic claims — Every catastrophic claim requires varying levels of intervention and care. Many will require specialized medical care, extensive rehabilitation, advanced medical equipment and potential vehicle and home modifications. Catastrophic claims costs are increasing due to:

  • Hospital staffing shortages
  • More high-cost injectable drugs
  • Increasing cancer rates
  • Longer hospital stays resulting from multiple conditions, complications and complex procedures
  • Higher medical equipment costs
  • Skyrocketing costs of home modifications.

Pharmaceutical costs — There are two significant drug cost drivers:

  • Specialty drugs: These are significantly more expensive than their traditional drug counterparts, often costing more than $2,000 per month per patient. However, some pharmaceuticals cost much more. The drug Tretinoin, which can help manage complications of leukemia, costs $6,800 a month. Others cost upwards of $100,000 per year. The cost and utilization of these drugs is growing, according to Aon.
  • New weight-loss drugs: The newest pharmaceutical cost driver is the proliferation of trendy new weight-loss drugs like Wegovy, Saxenda and Ozempic, which cost more than $1,000 a month. These have proven to be highly effective in helping people lose weight and are in high demand. Insurers typically won’t cover these medications if someone simply wants to lose weight, though.

Cost-shifting hesitation

The report predicts that employers will be hesitant to make significant changes to how much their employees contribute to their health plan premiums.

Aon estimates that the average employee premium contribution in 2023 is $2,682, while they pay out another $1,993 in deductibles, copays and coinsurance.

“We see employers continuing to absorb most of the health care cost increases,” Farheen Dam, North American Health Solutions leader at Aon, said. “In a tight labor market, plan sponsors are hesitant to shift significant cost to plan participants and make benefits less affordable.”

Talk to us about your options as 2024 approaches. We can help you with different plan designs and cost-sharing arrangements that may reduce your firm’s premium outlays.

Employers ‘Unwavering’ in Providing Group Health Benefits: Research

Large employers are unwavering in their plans to continue offering group health plans to their workers instead of funding individual reimbursement accounts that would allow them to shop for plans on government-run exchanges, according to new research.

The poll of 26 health benefits decision-makers at large firms, carried out by The Commonwealth Fund and the Employee Benefits Research Institute (EBRI), found that despite rising premium and health care costs, they felt obligated to offer health insurance instead of shunting employees to exchanges.

Employers since 2019 have been allowed to fund individual coverage health reimbursement accounts (ICHRAs) with pre-tax dollars for their employees to satisfy the Affordable Care Act’s employer mandate. Workers are required to use their ICHRA funds to purchase a plan on healthcare.gov or a state-run health insurance exchange.

However, large employers feel they can do a better job at providing their workers with coverage, according to the report.

“Most interviewees expressed a strong skepticism that their firms would drop health benefits or direct their workers toward marketplace exchanges,” said Jake Spiegel, research associate of health and wealth benefits research at EBRI. “Broadly, companies continue to view their health benefits as a recruitment and retention tool and cutting these benefits would hamper their efforts to cultivate a strong workforce.”

The health benefits decision-makers at large firms told researchers that jettisoning their group health insurance benefits would make it more difficult to attract and retain talent. They said there were other benefits to providing group health coverage to their workers, including:

  • They felt they could offer their workers a better deal than what was available to them on public exchanges. “We liked to have control. We can do a better job with design than the exchanges.” — Health care company benefits executive
  • They felt they simplified health insurance for their employees, who would possibly feel overwhelmed by all the choices on public exchanges. “We don’t want [workers] out shopping on their own, [exchange plans] aren’t easy to understand.” — Benefits executive at a financial services company
  • They viewed their companies as paternalist, meaning they have a responsibility to also help their workers make better health insurance decisions. “It would make workers feel like you were cutting and running.” — Benefits executive at a manufacturing firm
  • They didn’t want to be the first to jump out and completely disrupt their group health benefits offerings. “A big part was trepidation. Nobody wanted to be first.” — Benefits executive at an insurance company

Some of the interviewees said that funding ICHRAs and sending their workers to ACA exchanges would rob the company of the opportunity to help workers manage expensive health conditions.

For example, under IRS rules, employers may cover some drugs and services on a pre-deductible basis for workers who are enrolled in high-deductible health plans with attached health savings accounts.

But likely the biggest reason for not taking the ICHRA leap is the effect on employee satisfaction. Executives told the researchers that their workers expect them to provide a “suitable menu of health benefits options” and that they trust that their employer has shopped around for the best deal that doesn’t reduce quality.

Additionally, they felt that their workers would not be happy about being shunted to an exchange and having to take it on themselves to sift through the myriad of plans available to them at different cost and benefit structures.

“[Employees] don’t really take the time or energy to really understand, and they don’t want to. They trust us to make the decision for them,” one benefits executive told the researchers.

The takeaway

While this survey was only of large employers, market indications are that most mid-sized and smaller firms have also been sticking to providing their employees with health insurance coverage.

Offering a comprehensive group health plan is still the best way to retain and attract talent while satisfying the employer mandate under the ACA. Even for employers not subject to the mandate, to be competitive in the job market, offering health insurance is still a priority.

Finally, treading into ICHRA territory requires foresight and planning and companies have to prepare for possible blowback if the employees don’t like the exchange experience or can’t get the same coverage at the same out-of-pocket cost to them as they did before.

Doing it incorrectly, such as not funding the accounts with enough money, could open your organization up to fines.

Narrow Networks, Tiered Plans May Reduce Costs

Inflation, an aging workforce and people catching up on care they skipped during the COVID-19 pandemic are some of the main ingredients that will drive the cost of group health benefits over the coming years.

The key for employers grappling with these higher costs is how they can reduce their impact by switching up plan offerings and choosing plans that do a good job of managing specialty drug costs, which have been spiraling over the last decade.

Health spending dropped considerably in 2020 and 2021 as people stayed away from health care environments, but now people are back seeking care that was delayed. That’s caused a sudden spike in claims for health plans across the board.

Also, more health plans have boosted their mental health offerings, which patients have been taking advantage of, leading to further outlays, according to a recent report by Marsh McLennan Agency.

While there is not much employers can do about rising premiums, a combination of measures could help businesses defray cost increases in the near term.

Compare insurance plans and providers

If you’ve been offering the same plans every year, we can work with you to compare providers to see if there are better deals for you among their competitors.

Also, plans can vary greatly among insurance plans and each insurer will have different deals to offer. Even your current slate of insurers may have plans that you are not offering.

We can help you cut through the noise and find plans that may be a better fit for your organization.

It is important to keep in mind that a lower premium does not mean it’s the best deal. Some lower-cost plans may have narrower networks, which could result in some employees losing access to their regular doctors.

That said, there’s been a trend towards so-called “high-performance,” narrow provider networks that aim to reduce costs while maintaining efficiencies and quality of care.

Other cost-saving measures

Insurance carriers have been trying out new approaches to controlling costs, while improving health outcomes for their plan enrollees. Money spent up front on quality health services can yield future savings if the patient needs less treatment.

Some insurers and self-insured employers have been able to generate savings of 5 to 15% by employing:

Tiered networks — These health plans sort providers into tiers based on their cost and, often, quality relative to other similar providers who treat comparable patients. Providers with higher quality and lower cost are typically given the most-preferred tier rankings.

Centers of excellence — Many self-insured employers and more health plans are also contracting with “centers of excellence.” While there is no specific definition of a COE, these providers deliver positive patient outcomes, lower costs, raise member engagement and have high rates of patient satisfaction.

Often, an OEC may have a specialty, like a chronic disease or a specific service such as radiology. Working in tandem with a clinical analytics vendor, payers will connect members with health systems that demonstrate high performance in these areas.

Referral management — More health plans are also starting to use referral management software to improve efficiency and trust in care coordination.

These systems synchronize patient data transmission from one physician to another, and also to the patient. A referral management system aims to facilitate good communication between the consultant, specialist, health care provider and the patient.

The system increases trustworthiness and transparency of treatment and diagnosis, and decreases inefficiency in care coordination and operational arrangements.

The above measures can be applied across the care continuum — hospitals, primary care, specialty groups, post-acute providers and ancillary care — while maintaining access and quality of care.

The takeaway

Getting the cost equation right will be a challenge in the coming years as premiums are expected to rise at a faster clip than they have been in the last five years.

Talk to us about finding health plans that are offering different structures for addressing costs while also improving care for your workers.

Inflation Could Hit Group Health Insurance Premiums

The health care sector is not immune to the effects of spiking inflation, and the increasing cost of care is likely to spill over into health insurance — but it’s uncertain by how much.

Mid-year is the time that health insurers start setting their pricing for the upcoming year, and they are currently locked in what one trade publication calls “bloody” contract negotiations with doctors and medical networks to secure the highest prices they can for their services.

Hospitals and medical services facilities such as labs and imaging centers, like other employers, have to contend with the volatile job market and the spiking cost of supplies and machinery.

But the effects on health plans are still unclear as insurers can reduce the impact of higher costs by paring down networks, scaling back some benefits. This may be the case for smaller insurers that have less clout than their larger counterparts, but experts say that inflation will have a greater effect on rates than in recent years.

Add to the equation recent interest rate hikes by the Federal Reserve, which will increase health systems’ borrowing costs and even impede funding for new capital projects.

When they negotiate network rates with insurers, providers take into account all of their own costs when tabulating their offers.

Using spiking inflation as leverage

The trade publication Modern Healthcare noted in a recent report that escalating costs have already influenced contract negotiations between medical providers and insurers.

According to Modern Healthcare, providers that are currently in negotiations “can use inflation as leverage, given that physician groups’ and hospitals’ daily operations are tied to the rising cost of gas, food and other goods.”

It predicts also that providers will argue that more people will forgo or delay care as inflation eats into their expendable income, which in turn will increase the cost of care in the long run as those untreated issues develop into serious ailments.

Medical providers and insurers usually negotiate new contracts every three years, so those hospitals and doctors that renegotiated last year or in 2020 will have to absorb their higher costs. Inflation is already built into these contracts, which didn’t anticipate the higher levels we’ve witnessed in 2021 and 2022.

That leaves them in a bind since insurers won’t be willing to renegotiate contracts that include provisions offsetting higher-than-expected inflation.

It’s due to these pre-negotiated contracts that employers didn’t see a surge in their premiums coming into 2022. But that may change as new contracts come into effect.

While the industry was not terribly affected by inflation in 2021, recent data suggests it’s starting to hit health care providers.

Hospitals’ average labor expense per adjusted discharge in March 2022 rose 15% from the same month in 2021 and 32% from 2020, according to the Kaufman Hall “National Hospital Flash Report.”

Meanwhile, providers are paying more for supplies and equipment, as well. Non-labor expense per adjusted discharge rose nearly 26% compared with February 2020.

How will my premiums be affected?

The big question of how much of these increased costs hospitals and other providers will be able to pass along to health insurers and patients remains. For certain, inflationary pressures will be a topic of discussion during contract negotiations for 2023.

While rates for group health plans are still being set, many carriers have already filed 2023 rates for plans they sell on Affordable Care Act marketplaces. Average rate hike filings for 2023 have been hovering around 7.5% in mid-2022.

What You Need to Know About COVID Test Kit Rules for Group Health Plans

Starting Jan. 15, the nation’s health insurers have been required to cover the cost of up to eight at-home rapid COVID-19 tests per month for their health plan enrollees.

Insurers are taking different approaches to the mandate and, as an employer, you should communicate with your covered staff about this new benefit, how it works and other advice.

According to frequently asked questions posted by the Department of Labor, coverage for over-the-counter test kits must be covered by insurers without cost-sharing and without a doctor’s order or prescription. It laid out a series of rules insurers and health plans must follow. They:

  • May require enrollees to submit reimbursement claims for OTC COVID-19 tests (the agency, however, “strongly encourages” plans to reimburse pharmacies directly instead).
  • Must reimburse plan enrollees for tests they purchase outside of their preferred network up to $12 per test if they also offer coverage for OTC tests through a pharmacy network. Health plans are authorized to provide a more generous reimbursement from tests purchased through a non-preferred provider.
  • Can limit the number of OTC tests covered without cost-sharing, as long as they cover eight per month per enrollee with no cost-sharing. That means a family of three on a family plan can be reimbursed for up to 24 tests per month.
  • Cannot limit the number of covered tests if they are ordered by a doctor after a clinical assessment.
  • Can require enrollees to attest that OTC tests they are reimbursed for are for personal use and not for work, that they are not being reimbursed for the tests by other sources and that they won’t resell the tests.
  • Can require that enrollees provide receipts as proof of purchase.

Action items

Contact us or your group health insurer for guidance on how it will handle payment for OTC tests. It is important to:

  • Check that it has pharmacy and retailer networks in place where covered individuals can obtain the OTC tests.
  • Check if it has a direct-to-consumer shipping program for kits.
  • Check if it has systems in place to handle claims and for reimbursing either participants or participating pharmacies that have point-of-sale test kits available.
  • Ask the insurer whether it has any purchase or reimbursement limits if tests are purchased at a non-network pharmacy or retailer.

Once you have those details in hand, hold a meeting with your staff covering the following:

  • An explanation of the new benefit and how their insurer will reimburse or pay for the kits.
  • Go over the claims and reimbursement process if they pay out of pocket at a non-participating pharmacy.
  • Provide a list of network pharmacies and retailers that will offer point-of-sale test kits that the insurer pays for direct. Also provide information on any direct-to-consumer purchase options.
  • Tell them about any reimbursement limits if they purchase from non-preferred pharmacies, or other limits (like the eight tests per month limit).
  • Advise your staff to keep receipts for any at-home test kits they have purchased since Jan. 15. They should also save the boxes the test kits come in as some plans may require them as proof of purchase.

Uncertainty Weighs on Group Plan Cost Expectations

U.S. employers are expecting their group health insurance costs to climb 4.4% in 2021, despite the ravages of pandemic and a likely uptick in health care usage next year, according to a new survey.

The expected rate increases are on par with much of the last few years when insurance premium inflation has hovered between 3% and 4%. Despite the expected increase, employers do not plan to cut back on benefits for their employees, according to the Mercer “National Survey of Employer-Sponsored Health Plans 2020.”

The COVID-19 pandemic has injected a large dose of uncertainty into the marketplace. Overall, health care expenditures have plummeted since the pandemic started, which at first seems counterintuitive. But many hospitals postponed elective and non-emergency surgeries and procedures, while fewer individuals were seeking care either out of fear of going in for it or because they could not get appointments.

For example, the first three months after the pandemic had gotten a foothold in the U.S., according to the Willis Towers Watson “2020 Health Care Financial Benchmarks Survey,” monthly paid claims per employee dropped as follows:

  • April: 21%
  • May: 29%
  • June: 14%

“So far, the additional medical costs associated with the testing and treatment of COVID-19 have been more than offset by significant reductions in utilization across many service categories,” the insurance industry research firm recently wrote in its report.

Additionally, the Mercer report predicts that a significant portion of the deferred care will never be realized. And, for those people who have deferred care, when they eventually decide to come for the care will also depend on the course of the pandemic, hospital capacity and whether people feel safe to go in for the treatment.

“Different assumptions about cost for COVID-related care, including a possible vaccine, and whether people will continue to avoid care or catch up on delayed care, are driving wide variations in cost projections for next year,” Tracy Watts, a senior consultant with Mercer, said.

Employer reactions

Despite the expected cost increases, Mercer found that few employers plan to make any changes to their benefits this year, as they seek to keep things stable for their staff. The survey found that:

  • 57% will make no changes at all to reduce cost in their 2021 medical plans (up from 47% in the prior year’s survey).
  • 18% will take cost-saving measures that shift more health care expenses to their employees, including raising deductibles and copays.

Employers are also adding benefits, some of them prompted by the pandemic and shifts in how health care is accessed. For example:

  • 27% are adding or improving their telemedicine services (telemedicine for episodic care, artificial-intelligence-based symptoms triage, ‘text a doctor’ apps, and virtual office visits with a patient’s own primary care doctor).
  • 22% are adding or improving their voluntary benefits (critical illness insurance or a hospital indemnity plan).20% are boosting their mental health services coverage.
  • 12% are offering targeted health services, like for diabetes and other chronic conditions.
  • 9% are offering more support for complex cases.
  • 4% are offering services to limit surprise billing.

The takeaway

Mercer noted the following trends going into 2021:

Keeping the status quo – A majority of employers surveyed are avoiding making any changes to their health plans, including increasing employee cost-sharing, even if premiums increase. Instead, they are focused on providing a stable source of health insurance for their staff and supporting their workers as they deal with stress and effects of the pandemic.

Digital migration – More employers are offering digital health resources like telemedicine, telehealth apps, and virtual office visits, for their convenience, safety, efficiency, and cost-effectiveness.

Costs uncertain – Due to the effects of the COVID-19 pandemic, cost projections are uncertain at best. The avoidance of medical care could translate into a higher utilization in 2021 and hospitals may start charging more to recoup lost revenues from 2020. Or people may have forgone a lot of that care forever. It’s too early to tell.