While the Cadillac tax’s two-year delay has employers breathing a sigh of relief, the tax is still law (for now) and will continue to drive employers toward cost-cutting benefit arrangements like high-deductible health plans. We expect employers in 2016 to add telemedicine services, increase enrollment in consumer-driven health plans, and contract with ACOs. Employers have a challenge ahead of them this year with skyrocketing specialty pharmacy costs—and how to pay for them. Employers are also increasingly turning to private insurance exchanges as a cost-control mechanism.
Consumer-driven health plans: Decision Resources Group data shows that growth in CDHP enrollment slowed as of July 2015, increasing about 8 percent year over year compared to 26 percent and 29 percent increases in the two prior years. CDHP now makes up 17 percent of total enrollment, and we expect it to grow to 19 percent in 2016. The rise in these plans is forcing employees to “shop” for their healthcare since they are now paying out-of-pocket for many services and compare costs of different providers and facilities.
Telemedicine: Employers have discovered telemedicine as a quick, easy and affordable way to offer healthcare services. Expect many employers to add telemedicine to their healthcare benefit plans in 2016Mercer’s National Survey of Employer-Sponsored Health Plans shows the number of large employers offering telemedicine services increased from 11 percent in 2013 to 30 percent in 2015. We expect this to climb to 40 percent in 2016. Jumbo employers with at least 20,000 employees are even more likely to offer telemedicine services, according to the survey. The National Business Group on Health said the percentage of employers planning to offer telehealth to employees in states where it is not restricted will rise sharply to 74 percent in 2016 from 48 percent in 2015. Telemedicine visits at kiosks, which are a version of onsite clinics, are being offered by some employers as a cheaper option than onsite clinics. Kaiser offers several of these kiosks, called HealthSpot Stations, throughout California for its largest employers.
ACO-tied plans and direct-to-employer contracting: Plans tied to accountable care organizations are now being offered in markets where ACOs had been virtually non-existent, like Oklahoma. They are becoming popular choices for employers who are focused on ways to save costs and increase quality. A few large employers are going even bolder: direct-to-employer contracting that leaves the health plans out altogether. Boeing has adopted this strategy with health systems in Seattle and then expanded direct ACO contracting to Charleston, S.C., and St. Louis. Intel Corp., Lowe’s Corp., and Wal-Mart also offer such arrangements. We expect Boeing will continue to expand its program to new cities in 2016, and at least two new large employers will launch their own programs. One is expected in Orange County, Calif.
Specialty pharmacy: A challenge for employers is rising pharmacy costs, especially high-cost specialty drugs like those used to treat hepatitis C. Specialty drug costs caused CalPERS rates to rise 7 percent in 2016, compared to 4 percent the year before. Pharmacy costs accounted for nearly 45 percent of the overall rate increases. This conundrum remains a new frontier for employers, as CalPERS, which usually leads the trends, is currently studying avenues to bring down these costs. Expect employer groups to find ways to use their size to implement pharmaceutical benefit strategies ranging from negotiating drug costs to placing limits on who is eligible for high-cost drugs.
Private exchanges: While movement into private exchanges has been tepid nationally, it’s proving to be a popular option in some areas like California, where CalChoice is seeing enrollment explode. Employers, especially small groups, like that private exchanges offer plan choice and the defined contribution model. Some large employers, however, are skeptical that the private exchange can do a better job than they can of controlling costs. Mercer’s study finds that 6 percent of large employers are using or will begin to use a private exchange in 2016, a 50 percent increase over 2015.
Jenny Kerr is a senior analyst at DRG and an Employer Benefit Trends expert. Follow her on Twitter at @JennyKerrDRG.