On Wednesday, November 10th, the Kaiser Family Foundation released results from its 2021 survey on trends in employer health benefits. The topline takeaway: not much has changed. Premiums rose by 4 percent in 2021, and the cost to insure a family of four, just over $22 thousand, is comparable to the price of a new Honda Civic. Shocking though that may be, the growth rate for health care costs actually remained relatively steady since 2019, and given the marked increase in the overall rate of inflation (6.22% in 2021), employers and other health care purchasers might be thanking their lucky stars that providing family coverage only costs as much as a Honda – not a Tesla.
The relief will be short-lived. Data from the Peterson-KFF Health System Tracker show that in the first half of 2021, hospital admissions – including admissions for patients with COVID-19 – were about 15% below expected levels; without COVID patients, admissions are down 20%. This suggests two troubling trends for employers: their plan members are continuing to defer elective procedures, or forego care altogether, and health care unit prices are rising. At some point, pent up demand and the downstream effects of care deferred will come home to roost. Although CPR is not in the “prediction business,” it’s a pretty safe bet that we’ll soon see another dramatic spike in health care costs.
When that happens, many employers may find themselves flat-footed and on rocky shores, struggling to absorb burgeoning health care costs, but unable to shift the weight further onto the shoulders of their employees. For family coverage, employees typically pay 22% of their premiums through payroll deductions; in 2021, this translates to ~$6,000 per year, plus any deductibles, coinsurance, co-pays or other cost-sharing mechanisms. It’s become clear to employers that (1) they are pressing against the limits of what their workers – particularly lower-wage workers – can afford, and (2) that in a nationally tight labor market, where employers struggle to attract and retain talent, asking employees to pick-up additional health care costs could easily backfire.
For the time being, employers appear committed to maintaining the status quo, with a few key adaptations that speak to the necessities of managing health care benefits during a pandemic. According to the 2021 survey, a sound majority of employers extended and promoted their telehealth programs, and many enriched their behavioral health benefits by expanding services and waiving cost-sharing. These strategies may prove effective in improving employees’ satisfaction with their health care benefits, but unfortunately, they do little to buffer employers from the coming tide of health care cost inflation.
In 2021, employers are in the eye of a hurricane, and when this period of relative quiet fades and health care costs begin to spiral again, employers will be compelled to confront some painful tradeoffs. The good news that market-shaping strategies like tailored networks, innovative benefit design, direct contracting models (to name only a few) have the potential to reduce costs and improve care outcomes. These models require a little more elbow grease to administer, but they offer viable alternatives to absorbing spiraling health care costs or passing them on to employees and their families. COVID-19, it seems, provided a moment of reprieve; when it ends, will employers be ready to face the headwinds?
CPR’s Director of Projects and Research, Julianne McGarry, MPP, wrote this blog post.