Employer Health Benefit Costs to Rise 6.5% in 2020

A focus on managing chronic conditions, and education to improve health care utilization can help employers manage cost increases.

U.S. employer-provided medical benefit costs are forecasted to rise 6.5% in 2020, outpacing general inflation by 3.8%, according to the 2020 Global Medical Trend Rates Report released by Aon plc.

The increase for U.S. employer-sponsored medical plans expected next year is due to a combination of higher costs for specialty drugs, moderate price increases for care and flat or decreasing health utilization.

Aon’s report confirms the increasing impact of non-communicable diseases on health care costs globally. In the U.S., musculoskeletal, cancer, cardiovascular, diabetes and high blood pressure were the most prevalent health conditions driving health care claims. Aon’s report also confirms the growing prevalence of risks from unhealthy personal habits in the U.S., such as physical inactivity, obesity, bad nutrition, aging and excessive alcohol and substance abuse.

“Many of the risk factors lead to chronic conditions with long-term medical costs that make them difficult to treat and result in long-term medical cost increases,” says Tim Nimmer, Aon’s global chief actuary for health solutions. “As a large portion of our waking hours are spent on the job, the workplace is a logical place to create a healthier culture and change behaviors. Our goal is to guide employers as they become more critical in helping individuals and their families to take a more active role in managing their health, including participating in health and well-being activities and better managing chronic conditions.”

Of the health care initiatives large employers participating in the National Business Group on Health’s (NBGH) latest Health Care Strategy and Plan Design Survey cited, implementing virtual solutions (51%) and developing a more focused strategy to address high-cost claims (39%) were at the top of the list.

Increasingly, employers are working with partners to develop innovative solutions and address emerging challenges. Another reason for increased reliance on partners for 2020 is necessity, especially in the area of high-cost specialty therapies. Some therapies already on the market are in excess of $1 million per patient, and it is likely that new drug therapies will cost even more. As a growing number of high-price drugs from the pipeline are approved, the need to work closely with partners on how to finance and manage these therapies will only increase, the NBGH survey report says.

As for decreasing health care utilization, Lively found many employees don’t understand health benefits—including that most insurance covers preventive care. Better education can lead employees to use benefits correctly and become healthier, it says.

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