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.
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. 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.
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. 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.” 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.
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.
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.