Plan Sponsors: Plan and manage new health care cost drivers

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Inflation, the changing profile of the workforce and a return to the doctor’s office are the latest active ingredients creating recurring headaches for managers of employer-sponsored health plans. Of course, they increase the cost to the sponsor. But if these factors cannot be controlled, sponsors can at least plan for and manage these new cost drivers.

This is what experts from the Marsh McLennan Agency, a unit of the global consulting firm, advise. The firm has gathered intelligence from inside and outside its domain in an effort to guide plan sponsors through what is sure to be at least six months of cost uncertainty.

The agency cited the “return of deferred use” as perhaps the most predictable and manageable factor. Plan members who avoided doctor’s offices and procedures during the pandemic are now coming back, seeking care that was delayed two to three years. The results are sure to increase claims across all health plans.

“As the number of medical visits increases in the remaining months of 2022 and into 2023, we will likely see an increase in the burden of newly diagnosed patients and increased rates of complications in those with existing chronic conditions,” the agency said in its report.

Two trends that emerged during the pandemic — greater use of telehealth and the demand for more mental health services — are likely to have different impacts on plan costs. Marsh McLennan says telehealth and related remote medical services are here to stay and should have a dampening effect on plan costs. However, there may be an initial cost increase associated with remote care.

“… The increase in use [of telehealth] it also comes with the need to share patient data with multiple providers. Health data is highly sensitive, and sharing it between providers can be a nuanced process. While each situation is unique, in general, reductions in care coordination may also increase costs,” the report said.

Meanwhile, many plans, in response to member requests, have added mental health treatment coverage to benefit packages during the pandemic. Studies have shown that plan members have indeed taken advantage of such services, and Marsh McLennan says it’s unlikely that use will decline significantly.

Bottom line: Members will file more claims after postponement during the pandemic, and sponsors should prepare for the surge.

Inflation can increase costs across the health plan. The good news: The federal government’s attack on inflation appears to be paying off. The bad news: Inflation has already driven up costs/prices, which will increase overall health care costs.

Inflation has already led to larger-than-usual pay increases as employers vying for top talent quickly responded to early waves of inflation by cutting wages and benefit packages. Health care systems were among those employers already struggling to hire. And while Marsh McLennan says hospitals and other providers are almost back to pre-pandemic occupancy levels, that staffing increase has come at a cost — one that will trickle down to health plans.

Increases in medical equipment costs caused by supply chain difficulties and inflation must also be shared by plan sponsors. Inflation planning has become a lost art after decades of price stabilization. But this would be a good time to resurrect these practices, says Marsh McLennan. Just in case our government can’t contain it.

“In general, it is becoming increasingly difficult to suppress increases in all spending. However, it remains to be seen how effective the measures taken by the government so far to limit inflation will be. The longer the elevated levels remain, the greater the impact.”

Workforce demographics are bound to change in the coming months as employers and workers respond to inflation and the economy’s vibrancy. If we enter a real economic downturn, employers will be forced to lay off. This would almost certainly cause a surge in claims from those leaving the company. And even the shadow of a downturn could make workers near retirement rethink sailing off into the sunset.

Perhaps the likely scenario is a mix of layoffs as a first defense against a downturn, combined with a growing reluctance for older workers to retire. The effect on the workforce: The profile of workers is aging. The effect on the health plan: An older workforce generates more claims.

“It is imperative that employers employ best-practice strategies to manage high-cost claimants that focus on optimizing care, containing costs, stopping losses and supporting employees to reduce health plan financial risk and improve outcomes for members,” says Garrett Gomez, Marsh McLennan Director, Actuarial & Underwriting, Employee Health & Benefits Division.

An employer cannot control inflation or any legislation that may come out of Congress, which can further complicate the administration of a health plan. But employers can set aside additional funds to offset expected spikes in claims and overall cost increases. They can review their benefits package to make sure it fits their workforce profile. And they can continue to incentivize plan members to use preventive care that will reduce claims and improve productivity over time.

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