Raising Deductibles: A Trend in Employer Health Costs
Nearly half of large U.S. companies anticipate raising deductibles to cope with rising health benefit costs by 2026, according to a recent survey by Mercer.
The survey highlights a growing trend among employers to shift additional out-of-pocket expenses onto employees as they grapple with escalating healthcare costs. Alison Myers, President of Venbrook Insurance Services, warns that this approach may do more harm than good. She argues that simply raising deductibles does not address the core issue, which is the soaring cost of major medical claims.
Addressing the Real Cost Drivers
Myers points to a dual crisis fueled by general healthcare inflation and an uneven claims distribution, where a small portion of employees generate the majority of costs. By increasing deductibles, employers predominantly impact employees who do not contribute to these high-cost claims. Myers suggests that this strategy overlooks the primary drivers of rising expenses.
One approach Myers suggests involves using a 20/60/20 risk distribution model. This framework divides employees into three categories: the healthiest 20% who use minimal healthcare services, 20% responsible for inevitable high-cost claims due to severe health issues, and the 60% in the middle with manageable chronic conditions. Proactive management of this middle group can prevent their escalation into high-cost categories.
Rethinking Cost-Reduction Tactics
Myers criticizes solutions like high deductible plans and cost-shifting, which often result in deferred preventive care and potentially higher long-term costs. This perspective also applies to coverage cuts for medications such as GLP-1 drugs, which manage chronic diseases like diabetes. Removing such coverage can lead to increased long-term healthcare costs.
| Employee Group | Focus Approach |
|---|---|
| Healthiest 20% | Maintain current low-cost service usage |
| Manageable 60% | Proactive chronic condition management |
| High-Cost 20% | Focus on unavoidable severe health costs |
Strategic Changes for Sustainable Outcomes
As projected health benefit costs are expected to rise by 6.5% by 2026, Myers emphasizes a shift from traditional cost-reduction methods to preventive strategies. She advocates for including financial executives in benefits discussions to reframe health benefits as investments in employee well-being rather than liabilities. Continuous engagement by benefit advisors beyond enrollment periods can guide employees to appropriate and cost-effective care settings, offering a potentially more sustainable path for managing healthcare expenses.