The employee benefits space is undergoing a transformation. With financial headwinds and new employee needs, many employers and plan sponsors are rethinking their programs and looking for ways to maximize savings.
Here are four key trends we’re following right now and some tactics employers and plan sponsors can take to address them:
What to know: About 40% of U.S. adults are obese and that number is expected to near 50% by 2030. Obesity is a medical condition that will continue to affect employee populations for the foreseeable future. The demand for weight loss drugs like GLP-1s has skyrocketed and some employees are demanding that their health plans cover these medications.
What to do: The reality is that only about 25% of group plans are currently covering GLP-1s for weight loss. While there is early research showing that GLP-1s can help employees lose weight, for most employers and plan sponsors the return on investment (ROI) from covering GLP-1s for weight loss is too far down the road. Additionally, without supplemental nutrition and lifestyle management, the vast majority of employees who stop treatment experience weight gain again. The best practice today remains to only cover GLP-1s for type II diabetes and not cover them for weight loss. Other tactics include tighter utilization protocols such as stricter requirements for eligibility, setting an annual or lifetime limit on how much the plan will cover and having employees work with a nutritionist and health coach before turning to GLP-1s. In time, as the cost of GLP-1s comes down, it may be reasonable to consider covering GLP1s for weight loss. For now, there is simply no ROI.
What to know: There are a few health conditions driving large claims for employers and plan sponsors. Top among them is cancer, which when diagnosed at a later stage can be considerably more expensive. Cancer survival rates are rising, and emerging oncology drugs that provide life-saving treatments come at high price points. Maternity and newborn care continues to have the potential for large claims today, and we are also seeing employees with chronic conditions like diabetes or hypertension having upticks in hospitalizations due to improper management.
What to do: Focusing on prevention is key. Using a data warehouse is one way employers and plan sponsors can proactively identify large claims at earlier stages and use that information to conduct outreach to members who need help managing conditions or receiving preventive care. Another route is to offer care navigation programs that connect employees with advocates who can personally guide them through their care and help them avoid preventable costs.
What to know: Inflation is impacting the cost of medications and health services. In particular, the healthcare labor shortage has driven a competitive talent market, dramatically increasing labor costs for hospitals and health systems. Labor accounted for 60% of hospital expenses in 2023. As hospitals are dealing with higher operating costs and tighter budgets, they are passing those increases on to consumers.
What to do: We’re seeing growing interest from employers and plan sponsors in using indexed pricing (sometimes referred to as reference based pricing) to try to right size premiums and copays for their employees. Instead of relying on carriers to negotiate with hospitals on costs, indexed pricing uses a benchmark like Medicare to determine the price of medical services. This method protects employers and plan sponsors from inflated prices. Another alternative employers and plan sponsors might want to familiarize themselves with is the idea of Individual Coverage Health Reimbursement Arrangements (ICHRA). This approach puts the pressure of choosing a health plan on the employee, giving them a fixed amount to spend and letting them choose their benefits.
What to know: With prescription drug costs also rising, employers and plan sponsors are increasingly frustrated with the lack of data and transparency in pharmacy pricing. At the same time, they’re growing more concerned over the threat of fiduciary lawsuits. In the last year, companies including Johnson & Johnson, Wells Fargo and JP Morgan Chase have all been sued by employees alleging that they breached fiduciary duties under the Employee Retirement Income Security Act (ERISA) by failing to control drug costs.
What to do: Employers and plan sponsors can’t ignore pharmacy benefits. In this evolving landscape, it’s important to stay on top of what’s happening and understand the cost containment strategies available that generate meaningful savings. We are seeing the transparent pass-through pricing model with pharmacy benefit managers (PBMs) gain momentum as a way for employers and plan sponsors to increase transparency and potentially cost savings. Another avenue is joining a pharmacy coalition or buying group that provides employers and plan sponsors with greater negotiating and purchasing power to help them decrease their annual pharmacy spend.
The employee benefits space is experiencing severe financial headwinds. Employers and plan sponsors need to take a proactive approach to protect themselves and their employees from surging healthcare prices. Conner Strong & Buckelew’s Employee Benefits team works with employers and plan sponsors to recommend programs that are tailored to their unique needs. With population health and pharmacy experts on our team, we are at the forefront of new strategies and tactics to lower costs, improve employee health and reduce risk.
Get the most out of your employee benefits program. Contact a member of our team today at 1-877-861-3220 or [email protected].
Michael Hanley
Senior Partner, Senior Consultant, National & Major Accounts
