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Employer health plan trends
The employer benefits business remains the bread and butter of American private health insurers. America’s Health Insurance Plans (AHIP) estimates that nearly 180 million working Americans receive health insurance coverage through their employer, which represents a significant market for health services payers. The stage is set amid a recessionary climate exerting cost pressure on employers and intensifying competition among health plans to capture market share. Health plans that understand newer value propositions required by employers, and can deliver on employer expectations, will outpace the industry.
The employee benefits market has evolved over the years across three phases:
- Phase 1: Health plan as one-stop-shop
- Phase 2: Health plan supplemented by high value direct solutions
- Phase 3: Health plan as eco-system coordinator
A decade ago, employers mostly shared a one-stop-shop mentality and purchased everything from the health insurance company. While it was convenient for employers to manage healthcare for their employees, both employer and employee needs were not being fully met and innovation was emerging at startups everywhere. In Phase 2, which swept the market about five to seven years ago, employers realized they needed to bring in additional benefits and programs. They started purchasing best-in-class solutions offered by several different vendors. This helped address specific issues but created fragmented experiences for employees.
Currently, in Phase 3, employers realize that while the best in-class-solutions offer choices that help attract and retain talent, the fragmented ecosystem has significantly increased the complexity of managing healthcare for employees and has created a highly disconnected employee experience.
Therefore, many employers are seeking changes to bring this fragmented ecosystem together while also managing labor and medical cost inflation.
To better understand phase 3 and what employers are looking for, PwC conducted a national Employer Benefits Perspective survey with more than 150 benefits decision makers at organizations of all sizes to gain a deeper understanding of employer and employee health plan behaviors and needs. The results and insights from this survey show how the employer benefit market is shifting.
Employer survey highlights: 4 dimensions
The survey found that employers’ concerns and needs for new, innovative solutions revolve around four major dimensions: digital ecosystem, clinical value, health benefits to support diversity and inclusion, and the workforce of the future. Employers are looking for digital value that drives improved employee experience and better navigation at a lower cost. As medical costs continue to rise, employers are seeking additional clinical value in order to optimize clinical outcomes, manage chronic conditions and control costs. At a time when the US workforce dynamics are shifting, employers are finding that they need to offer a wider range of benefits to promote and support diversity and inclusion. Employers are also critically thinking about how to build a benefits strategy for their workforce of the future as work flexibility becomes more prevalent.
Digital ecosystem
More than 80% of employers surveyed see digital healthcare tools as important given the anticipated needs of the workforce of the future, and 61% show willingness to spend and foresee purchasing or investing in an integrated digital ecosystem.
Offering solutions through a variety of platforms and channels can generate inconsistent experiences for employees, resulting in confusion and underuse of employer-purchased programs. PwC’s analysis finds that 25% of employers, regardless of size, work with more than 20 different vendors while the remainder work with at least 8-10 different vendors across their health and wellness benefits portfolio, not including additional vendors who support non-health benefits such as life, disability, and workers compensation. Despite this proliferation of solutions, employers’ number one identified barrier for adoption of these solutions is employee engagement and acceptance: 22% of employers identified maintaining employee engagement as their primary challenge for benefits and 20% of employers felt that the complexities of working with multiple vendors was "a headache.”
A sound digital strategy built on integration has become increasingly important for improving operations and employee experiences. PwC analysis suggests that employers will bring solutions together over the next five years to create a more connected experience for employees while still offering depth and breadth of benefits and programs.
Implications for health plans:
- Provide a single point of entry for employees as the “digital front door” enabling members to easily access a spectrum of providers for primary care, dental, vision, behavioral health, pharmacy benefits and other areas.
- Integrate physical and digital assets to create an omni-channel experience. Work with strategic platforms that provide a lower administrative cost baseline and seamlessly integrate with outside vendors, connecting customer service with employee assistance programs (EAPs), mental health, well-being, virtual care and other areas through an app or website.
- Create navigational simplicity and unified branding to help improve usage, ultimately driving to better health outcomes.
Clinical value
To mitigate rising medical costs along with current care navigation gaps, employers are seeking additional clinical value to optimize risk: 87% of employers are open to carving out risk to focus on employees with the costliest, most complex claims. Employers are also seeking NextGen advocacy / navigation solutions for which their top three purchasing criteria are employee experience (28% of respondents) followed by price (27%) and performance data on medical cost impacts (24%).
Rise in healthcare consumption, increasing medical cost inflation, and soaring medical labor costs are some of the factors behind the higher than usual media cost trend that employers are seeing: 78% percent of employers experience at least a 3-4% increase in healthcare spending each year, with nearly a quarter seeing 7+% year-over-year increased spending. See our Behind the Numbers 2024 report on what health plans we surveyed said about the biggest cost drivers in 2024.
Diabetes is the top driver of increased costs, with 27% of respondents noting that, followed by heart disease and cancer. Some of the other high-cost areas include auto-immune diseases, fertility, depression and hypertension. To manage medical costs, employers have been leveraging clinical solutions and purchasing advocacy programs but have become weary from paying high premiums for unproven solutions, encountering low employee engagement rates for certain programs and difficulty in scaling others. While most (65%) employers overall say their advocacy and care navigation resources are adequate, many are starting to see a dip in the ROI of these programs and are looking for alternatives.
Implications for health plans:
- Drive analytics and evidence-based clinical programs for managing medical and pharmacy costs, focusing on care for specific conditions, proving ROI through risk sharing agreements and communicating value generated to employers.
- Take an integrated approach to managing medical, pharmacy, dental, vision, behavioral and other benefits to engage the individual holistically.
- Deliver a personalized, integrated and more affordable care navigation experience to members.
- Consider offering clinical performance guarantees with measurable aggregated results.
Diverse benefits
Fewer than 50% of employers surveyed currently offer Diversity, Equity and Inclusion (DEI) related benefits. The primary reason cited by those who do not was a limited understanding of the types of benefits to offer.
Employers can offer a wider range of benefits to serve and promote diversity at a time when the US workforce includes four generations, more women and people from all walks of life and changing family structures. However, employers indicate they are unsure about what Diversity, Equity and Inclusion (DEI) health and welfare benefits to include and how to measure the ROI for these programs. This has led to fewer employers providing these benefits but opens the door for providing educational opportunities to employers.
One-quarter of employers offer mental health and well-being programs specific to DEI, and an additional 43% of employers are open to offering more DEI benefits in the next three years. Employers continue to focus on fertility benefits for same or different sex couples, and are also including surrogacy or other family building support. Broader coverage such as gender reassignment or coverage for hormone therapies remain the least offered benefits, with 15% of employers covering it.
Implications for health plans:
- Encourage and educate employers to establish DEI programs as a criterion for purchasing health benefits.
- Continue to focus on a diverse set of DEI benefits that includes family planning, caregiving, transgender benefits and other programs with a goal of creating a more inclusive and equitable working environment.
Workforce of the future
Though a majority (70%) of employers feel ready to meet the evolving needs of their workforce, employers are continuing to think critically about how to build a benefits strategy for their workforce of the future as work flexibility becomes more prevalent.
Fifty percent of employers say that flexibility in both location and hours remains a top value for their employees. Beyond this, financial security and mental well-being are a top driver of job satisfaction among employees. Most large employers have reported a large uptick in the use of mental health benefits. Additionally, with Generative AI, the workplace is likely to continue to evolve and require employee upskilling and retraining. Through the pandemic, employees had already begun to place importance on opportunities for training, with 25% of employers reporting that as one of their top three desired non-traditional benefits, and this trend will likely accelerate further.
Implications for health plans:
- Offer traditional and non-traditional options that help empower employees to make decisions about how to spend their benefit dollars.
- Proactively build and advise on choice and allow for flexibility in how employees can purchase and use benefits based on their unique needs.
- Continue driving engagement through digital tools to help members navigate options offered through EAP programs for childcare, eldercare or other resources.
Moving into the future
As employers continue to search for more value in delivering benefits to their employees, there is a real opportunity for health plans to design solution offerings that meet the spectrum of traditional needs such as managing clinical conditions as well as evolving needs such as diversity, inclusion and flexible work. Keeping the employee experience front and center by leveraging both physical and digital assets to deliver these benefits will be critical.
For healthcare providers, there is an opportunity to engage in innovative contracting / bundled payment arrangements, especially for care journeys with higher prevalence for working populations (e.g., pregnancy, musculoskeletal, oncology, or behavioral health), to drive towards improved outcomes and lower medical costs.
Finally, for health services vendors and solutions, the evolution of the benefits ecosystem presents an opportunity to partner with health plans to deliver digital-forward advocacy solutions that streamline navigation and improve the overall member experience.
About the survey
PwC conducted an in-depth employer benefits strategy survey and interviewed over 150 employer decision-makers nationwide across multiple industries to gain an understanding of employer and employee health plan behaviors and needs. Respondents were from employers of all sizes that offer health and other benefits to their employees. The results and insights from this show how the employer benefit market is shifting.
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Jahnavi Kundu, Sri Murthy and Yiwei Shen also contributed to this article.
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