Employers’ Health Benefit Increases Will Be Far Lower Than ACA Premiums

A majority of large employers expect the cost growth for their health care benefit to remain stable at 6 percent in 2017, but specialty drugs are the most-cited driver of cost increases, according to a survey report released Tuesday by the National Business Group on Health.

The report is an annual survey of the group’s members. It reflects plan design information of 133 large employers from a wide variety of industry sectors.

Many employers expect to be able to hold cost growth at 5 percent by making changes to plan benefit designs. There’s also a growing focus on streamlining delivery systems and tactics aimed at controlling drug costs.

“While employers have been able to keep increases in check for the past few years, costs are still running at more than twice the rate of inflation and general wage increases, thereby threatening affordability,” said Brian Marcotte, president and CEO of the National Business Group on Health. “These cost increases, while stable, are both unsustainable and unacceptable.”

Projected employer benefit costs are a stark contrast to the expected premium increases and out-of-pocket costs on the Obamacare exchanges next year. Employer-sponsored premium increases are expected to be about half of what has been proposed on individual exchanges for next year. Net deductibles are expected to be, on average, about one-third of those on exchange plans.

The difference could be explained in part by the relative age of the different marketplaces. While insurers are still adjusting to the relatively new Obamacare exchanges, the employer-based marketplace has many more years of experience to help keep costs stable. The employer market also likely has a better mix of sick and healthy people, helping keep costs down, on average.

Nearly one-third of employers said specialty pharmaceuticals has been the highest driver of their own health costs, and 80 percent said it was one of the top three highest cost drivers. By contrast, only 6 percent of respondents cited drug costs as the highest cost driver in 2014.

In response, employers are taking steps to curb drug costs. About two-thirds of respondents said pharmacy management techniques are among their most effective cost-control tactics. In 2017, 74 percent of employers will use more aggressive utilization management tactics to try to control drug costs, and 69 percent will require medications to be obtained through specialty pharmacy. More than one-third of employers said their pharmacy plan design includes a specialty tier, which often requires higher cost-sharing for expensive drugs.

Many employers are also responding to the increased use of opioids with efforts to curb painkiller abuse. Thirty percent of respondents said they will implement new restrictions on prescription opioids, such as creating a preference for abuse-deterrent formulations.

The survey found that employers have not had much reaction to public health insurance exchanges created under the Affordable Care Act. The most common response has been to drop coverage for early retirees, but only 22 percent of employers have done so and only 2 percent plan to do so in 2017. Only 1 percent of the employers surveyed has dropped coverage for employees altogether.

Furthermore, employer interest in private exchanges is declining. In 2014, the first year the exchanges were in operation, 2 percent of responding employers participated, but 35 percent said they were considering doing so in the future. In 2016, 4 percent were currently using a private exchange, but only 10 percent said they are thinking about doing so at a later date.

The survey also asked employers when they expected their own benefits to hit the threshold for the Cadillac tax, an excise tax on benefits above a certain level in the Affordable Care Act. The tax was originally scheduled to take effect in 2018, but Congress pushed the start date back to 2020 in December in response to strong criticism.

If the tax goes into effect in 2020, 53 percent of employers said at that least one plan they offer would hit it, and 35 percent said their plan with the highest enrollment would be subject to it. However, both presidential candidates and the majority of lawmakers in Congress have voiced opposition to the tax.