As we
are poised to welcome a new decade in just a few short months, what changes
might we expect to see in the employee benefit space, or more specifically with
medical cost trends? In a report published this summer titled, The
Medical Cost Trend, Behind the Numbers 2020, PWC explains the upcoming
shift in cost of care and how this shift may affect businesses, their employees
and benefit trends.
Click here to read the full report.
The Future of HDHPs
As a
response to escalating premiums, High Deductible Health Plans (HDHPs) have
become a way for employers to attempt to mitigate cost of coverage for their
employees in recent years. However, the continuing tight labor market presents
problems when it comes to employers utilizing cost sharing as a solution to
their growing expenses. Employees are becoming unable and unwilling to bear
more cost of care as deductibles rise beyond the reasonable. Simply put, most
cannot afford it. And more so, the war on talent forces organizations to
compete on benefits. As a result, 2020 is projected to be the year we see a
decline in the 84% of employers who currently report offering an HDHP option.[1]
The Medical Cost Trend
The
Medical Cost Trend is defined by PWC as the projected percent increase in the
cost to treat patients from one year to the next, assuming that benefits remain
the same.[2] A
change in the medical cost trend can occur due to two main factors. First, unit
cost inflation, which is a shift in prices of medical products, services and/or
prescription drugs. Second, per capita utilization, described as an increase or
decrease in number or intensity of services used.[3]
For the
2020 year, the Health Research Institute (HRI) expects the medical cost trend
to rise to 6%, an increase from the previous two years.[4] So,
which of the two influencers is behind this trend? Prices are outpacing
utilization. Premiums are rising, but not because employees are getting more or
higher-quality care.
“Utilization
continues to be dampened by high deductibles and other cost sharing, but at the
expense of employee satisfaction.”[5] This
upward trend will push employers between a rock and a hard place as they work
to navigate snowballing costs combined with a tight labor market.
Enter the Employer Activists
PWC
notes that employers are finding that they are reaching a breaking point where
their employees are unable to front more costs of healthcare. As a result,
business leaders are becoming employer activists – a term coined by the HRI
that defines trailblazers who are committed to finding new ways to contain
costs of benefits. These employer activists are negotiating contract prices
themselves and even setting up their own provider networks.[6]
Leaders
that become employer activists will self-educate on their options for
employees. The PWC Medical Cost Trend report found that organizations,
particularly those with large offices and a lot of employees, will be more
likely to open or expand onsite clinics. Taking matters into their own hands,
employers will encourage preventive care in the workplace and take a hands-on
approach to helping employees maximize the benefits available to them.[7]
ArmadaCare’s Role
Employers
are beginning to realize that it’s time to think outside the box when it comes
to ensuring employees are covered. As more organizations assume the employer
activist role, make sure they know about the unique coverage offered by
ArmadaCare’s suite of products. Learn how we can help you combat the challenges
presented by the rising medical cost trend, while mitigating impact on talent
retention and recruitment. Contact us today.
[1] https://www.pwc.com/us/en/industries/health-industries/assets/pwc-hri-behind-the-numbers-2020.pdf
[2] https://www.pwc.com/us/en/industries/health-industries/assets/pwc-hri-behind-the-numbers-2020.pdf
[3] https://www.pwc.com/us/en/industries/health-industries/assets/pwc-hri-behind-the-numbers-2020.pdf
[5] https://www.pwc.com/us/en/industries/health-industries/assets/pwc-hri-behind-the-numbers-2020.pdf
[7] https://www.pwc.com/us/en/industries/health-industries/assets/pwc-hri-behind-the-numbers-2020.pdf
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