How employers are rethinking benefits as healthcare costs soar

A new way of providing health benefits

Most employers (88%) are uncomfortable disrupting their current benefit strategy to improve the quality of care and/or lower costs. Another three-quarters also said they would pursue changes as long as employee choice is not significantly reduced.

As such, 92% of employers said they will implement at least one value-based strategy next year, with centers of excellence being the dominant approach right now. Eighty-two percent of employers said they already have a COE in place, while another 12% said they are adding one in 2027 or considering one over the next three years.

A third of employers will also have a value-based clinical solution in place by 2027, the survey found. Another 31% said they will have a high-performance network by next year.

In the longer term, about 36% of employers said they are considering an outcome-based pricing strategy for 2028 or 2029. A third of respondents also said they are looking at advanced primary care.

But that's not all.

The survey also found that 39% of businesses are exploring alternative health plans over the next three years, such as individual coverage health reimbursement arrangements in which employees receive funds to find their own coverage.

Researchers said a small number -- 12% -- plan to actually implement a more transformative option like an ICHRA. However, employers are keeping these alternative approaches in their back pockets to better understand their options as costs continue to rise.

Moreover, 61% of employers are adding or considering a transparency pharmacy benefit manager program or a new-generation PBM, which are generally more tech-enabled and fiduciarily accountable to deliver more transparent pricing.

These strategies provide greater visibility into pharmacy spending, which employers want as their workers increasingly use high-cost specialty drugs, breakthrough cell and gene therapies and weight management medications.

Few employers currently cover  GLP-1s for weight management. However, those who do cover them intend to tighten their rules around coverage, even directing workers to direct-to-consumer methods.

AI: a double-edged sword

AI has created operational efficiencies in healthcare, especially for the administrative tasks associated with medical billing and claims reimbursement. Employers are no different; they plan to use AI tools to streamline benefits administration, improve employee experience and glean actionable insights from complex datasets, the survey showed.

Already, about 62% of employers are using AI for communications and 60% for navigation and support, either organizationally or through a vendor.

Approximately half of businesses also use AI for claims analysis and insights, as well as fraud, waste and abuse detection.

However, the survey noted that AI has also contributed to higher healthcare costs for businesses. Approximately 64% of survey respondents cited AI as a driver of costs due to its ability to optimize revenue capture for providers. Upcoding also contributed to AI's role as a cost driver, they said.

Currently, AI is on two sides of the same coin. A report from the Peterson Health Technology Institute released in April, also found that AI scribes and automated coding solutions inflate healthcare spending while worsening an already flawed prior authorization process. Health plans also blamed providers' use of AI for their higher costs in a June report from PwC.

Still, industry experts remain optimistic that the ongoing use of AI and other forms of technology will decelerate the unsustainable growth in healthcare costs by making staff more efficient and triaging care to avoid unnecessary and low-value services.

But vendors beware: 58% of businesses indicated they would replace underperforming solutions and the same percentage said they would eliminate lower-utilized programs. Employers want to hone the value of their third-party solutions and programs. As such, most expect to expand the scope of performance guarantees and increase the proportion of vendor fees tied to outcomes.

Jacqueline LaPointe is an Executive Editor at Xtelligent Healthcare Media, covering revenue cycle management, healthcare payers, health policy and health IT since 2016.