IN-DEPTH: 4 Key Health Trends Driving Employer Costs In 2024

A new report from the Business Group on Health predicts a 6% increase in health care costs in both 2023 and 2024, as employers continue to see significant spending in the areas of mental health, prescription drugs, and cancer treatment.

The report, the 2024 Large Employer Health Care Strategy Survey, had several interesting findings on what areas large employers are focusing on in an effort to manage health care costs.

1. Mental health challenges continue to increase

A significant number of employers (77%) reported an increase in mental health concerns among employees in the aftermath of the COVID-19 pandemic.

According to Ellen Kelsay, president and CEO at Business Group on Health, employers in the survey said they are increasing access to mental health service, including more options for support and lowering the cost barriers to care. “Some strategies and tactics employers are deploying include manager and peer trainings to help recognize mental health issues and direct employees to appropriate services; anti-stigma campaigns; mental health champions; and providing flexible work schedules that encourage employees to seek care during regular working hours,” she said.

The survey found that other areas have been affected by the pandemic as well, as more than one-third of employers (36%) expect increased challenges to health care access due to labor issues such as burnout and nurse shortages.

2. Rising drug costs continue to be a concern

Another top finding was that 92% of respondents said they were concerned or very concerned about high-cost drugs in the pipeline, and 91% said they were concerned or very concerned about the pharmacy cost trend overall. The report noted that employers have experienced an increase in the median percentage of health care dollars spent on pharmacy, from 21% in 2021 to 24% in 2022.

At least some of the focus on this issue includes relationships with pharmacy benefits managers (PBMs). The survey found that 73% of employers say it is a priority to find more transparency in PBM pricing and contracting, and 58% say they want to see additional reporting and better provider quality measurement standings.

“When it comes to market reforms, a key consideration is exploring transparent PBMs which allow employers and employees to have greater line of sight to drug pricing while eliminating some misaligned incentives in the pharmacy supply chain,” Kelsay said. “Employers are also exploring tactics such as prior authorization, step therapy, site of care management, and limited approvals for initial supplies of a new medication.”

3. Cancer has become a top driver of health care costs

This is possibly due to lack of preventive screenings during the pandemic, says the report. The survey found that 50% of employers listed cancer as the No. 1 driver of health care costs, and 41% said they are anticipating more late-stage cancers among workers due to delayed screenings. “Employers are taking steps to address this by focusing on advanced screening measures and maintaining 100% coverage for recommended prevention and screening services,” the report said.

4. Onsite clinics, virtual care driving costs

The survey also looked at some of the innovations in providing care, such as on-site clinics and virtual care. The data showed that 53% of employers offered an on-site or near-site clinic in 2023—and 53% plan to offer those options in 2024.

Not surprisingly, the demand for virtual care skyrocketed during the pandemic but has leveled off or declined in more recent times. “Employers have moderated their expectations about how transformative virtual health will be on health care delivery,” Kelsay said, noting that although a lower number of employers say that virtual care will have a significant impact on health care delivery in 2023 (64%) compared with results from 2021 (85%). Still, Kelsay noted, 65% is a relatively high number.

“This decrease is not entirely surprising given the prominence and necessity of virtual health during the peak of the pandemic,” she added, saying that employers are being more proactive in considering care coordination, cutting back on redundancies, and finding the best quality in providers.

“All that said, employers’ No. 2 priority for the coming year is to implement more virtual health opportunities, while also looking to streamline the number of vendors,” Kelsay said. “This is important because while employers may be looking to expand, they are also going to have an increasingly discerning eye towards those partnerships and will be looking to vendors who partner well and integrate with others.”


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