Employers Say Specialty Drugs a Factor Behind Rising Costs

Mercer surveyed employers to get their opinion about how they are being affected by healthcare costs and found a mix of good news and bad news, with the greatest impact being felt by smaller employers.

As other surveys have found, prescription drugs—specialty drugs in particular—remain a top cost driver for employers. Last year, the average rise of per employee cost of specialty drugs was 12%, with oncology making up the largest category.

Nearly 70% of employers said they were considering some type of focused action to manage the costs of specialty pharmaceuticals.

The cost of health benefits rose by 3.6% in 2018 and is expected to rise by about 4% again in 2019. Furthermore, that is faster growth than in 2017. The cost of benefits is still outpacing inflation and workers’ earnings growth. Average total health benefit cost per employee rose 3.6% in 2018.

But among small employers (10-499 employees), cost rose by 5.4% on average.

Midsize and large employers held cost growth to 3.2%, largely through strategies such as making investments to address underlying issues with care delivery, reducing specialty drug spending, adding telemedicine services, Centers of Excellence (COEs), technology-based health resources, and enhanced care management.

Some midsized and large employers are steering employees to a COE with financial incentives or even by requiring that employees use one.

Incentives are most common with transplants (25%), bariatric care (14%), and oncology (10%).

Among employers that steer employees to 1 or more COEs and have evaluated performance, nearly all have seen cost savings, better outcomes, and greater patient satisfaction.

Continued rise of consumer-directed health plans

Enrollment in consumer-directed health plans (CDHPs) rose from 30% to 33% this year, driven by growth from small employers.

CDHPs are high-deductible health plans (HDHPs) coupled with a health savings account (HSA) or a health reimbursement arrangement (HRA).

The average medical plan cost per employee was $10,357 for an HSA-eligible CDHP, while the cost of a preferred provider organization (PPO) was $12,457. While the plans, on one level, are less expensive, researchers publishing in The Center for Biosimilars'^® sister publication, The American Journal of Managed Care^® last year found that their growing use led to a significant increase in out-of-pocket (OOP) spending, and that this higher financial burden was particularly pronounced for the lower-income and chronic conditions subgroups.

Use of high deductible CDHPs jumped last year; offerings of these plans among employers with 10 to 499 employees jumped from 29% to 38%, and enrollment rose from 22% to 28%.

Offerings of CDHPs among midsized and large employers, already high, grew more slowly, from 64% to 68%, and enrollment rose from 34% of covered employees to 37%.

More midsized and large employers offered a CDHP as the only type of plan offered at the largest worksite in 2018 (13%, up from 10%)

Most employers still offer the CDHP as an option and those that are offered as full replacement plans tend to be more generous. For example, employers are more likely to offer a contribution, and the average contribution amount is higher—$737 in full-replacement plans, compared with $679 in plans that are offered as an option.

Midsized and large employers also slowed the pace of cost-shifting to employees, with the average individual PPO deductible for midsized and large employers rising by less than 2%, to reach $982. Small employers, facing bigger cost increases, raised the average individual PPO deductible by more than 5% to more than $2000.