As Healthcare Costs Begin to Rise Again, U.S. Employers Zero in on Affordability and Well-Being for Employees

Employers project health benefit costs will jump more than 5% in 2022, new survey finds.

Though health benefit costs are expected to increase by more than 5% in 2022, U.S. employers are prioritizing healthcare affordability and employee well-being over the next two years, according to a new survey by Willis Towers Watson, a global advisory, broking, and solutions company.

Despite cost management initiatives, employers expect their costs for medical and pharmacy benefit expenses to increase 5.2% in 2022, which is slightly lower than the 5.5% increase employers projected for 2021 but sharply higher than the actual 2.1% increase in 2020.

Last year’s increase—the smallest in decades—is considered an irregularity because many people deferred non-emergency healthcare during the pandemic and embraced telemedicine.

The total average employer cost, including premiums, is expected to rise from $12,501 per employee in 2020 to an estimated $13,360 in 2021. Employee contributions for premiums will increase slightly, from $3,269 in 2020 to $3,331 in 2021.

A total of 378 survey respondents who employ 5.9 million workers were asked to identify their key priorities over the next two years:

• Achieve affordable and sustainable costs for organization: 90%
• Achieve affordable costs for employees, especially lower-wage employees: 86%
• Enhance employee well-being: 85%
• Identify programs that support diversity, equity, and inclusion goals and social determinants of health: 78%

"Rising costs and increased utilization fueled by a resurgence in deferred care are driving employers to find new ways to control costs while providing employees with affordable, high-quality care," Julie Stone, managing director, health and benefits, Willis Towers Watson, said in a press release.

"COVID-19 accelerated both provider adoption and employee acceptance of telemedicine and virtual care. Employers see continued use of virtual care as integral to sustaining improvements made in access, quality and cost management," she said. "At the same time, employers must now address the Delta variant, encouraging workers to access the care and support they need while grappling with rapidly evolving conditions."

The survey identified several measures employers are taking to address affordability, benefit designs, and network management issues, including:

• Premium contributions based on pay and grade: Nearly one-fourth of employers (22%) structure employee contributions based on pay levels or job grades. Another 8% are planning or considering doing so in the next two years.
• Working spouse surcharges: One-fourth of employers (25%) use spousal surcharges when additional employer coverage is available for the working spouse. Another 9% are planning or considering spousal charges in the next two years.
• Narrow networks: Nearly one-third (30%) of employers are planning or considering offering a narrow network of higher-quality and/or lower-cost providers. Currently, two in 10 respondents (21%) offer narrow networks.
• Centers of excellence: Nearly one-half of employers (48%) use centers of excellence within their health plans. Another 23% are considering doing so.
• Concierge services: About one-third (31%) offer access to concierge services with integrated care management programs; 25% are planning or considering doing so.
• Telebehavioral health: Most employers (89%) are offering coverage for telebehavioral health services, and 7% are considering it.
• Onsite health promotions: More than one-half of employers (55%) offer onsite/worksite health promotion activities, and 17% are considering it.
• Specialty drugs: More than one-half (54%) evaluate specialty drug costs and utilization performance through the medical benefit, and another 29% are considering it.

"As employers update their ways of working, they are finding a challenging environment to attract and retain employees," said Jeff Levin-Scherz, MD, Willis Towers Watson's population health leader.

"Those employers that take action to keep their healthcare benefits affordable and easily accessible, strengthen the well-being of their workers and build a better employee experience will gain advantages in the future—namely, a more healthy, satisfied and productive workforce."