Employers Juggle High Healthcare Spending, Hiring Challenges in 2022

Employers are looking for answers as they face an ever-steeper healthcare spending trajectory and hiring challenges in the post-pandemic environment, according to a survey from the National Alliance of Healthcare Purchaser Coalitions (National Alliance).

“The consensus among many of the responding employers is that attracting and retaining employees has become a street fight,” said Michael Thompson, National Alliance president and chief executive officer.

“Concerns about a recession and runaway inflation make it even more critical that employers are able to hire and keep top talent and getting unreasonable healthcare costs under control has a far-reaching impact on wages and ability to compete.”

The survey pulled responses from 152 private and public US employers spanning a variety of industries including manufacturing, public administration, and wholesale trade.

National Alliance conducted the survey from August through September 2022. A third of the respondents had less than 1,000 employees, 36 percent had between 1,000 and 9,999 employees, and a little over three out of ten had a workforce of more than 10,000 strong (31 percent).

Most employers said that health and wellbeing benefits are crucial for achieving one of their primary goals post-pandemic: attracting and retaining talent (61 percent).

One of the biggest challenges that employers face—and a well-documented issue—is the rising costs of healthcare. Employer respondents pointed to increased pressure from drug prices, high-cost claims, and hospital prices as responsible for employer-sponsored health plans’ waning affordability. Separate research indicates that this trajectory is only expected to continue in 2023.

These costs have downstream implications for employees as employers try to cut costs. Nearly three-quarters of employers responded that rising healthcare costs will impact wages and salaries (73 percent). Most employers indicated that higher healthcare spending has diminished the company’s ability to be competitive (82 percent).

Five strategies emerged as the most popular solutions among employers for handling high healthcare costs: increasing high-cost claims management, improving mental health and substance abuse care access and quality, prioritizing whole person health, and pursuing hospital quality and price transparency.

Although high-cost health claims were tied with mental health and substance abuse care access and quality as the most popular strategy that employers are implementing or considering, most employers expressed that they were effectively managing these claims through intermediaries.

The most common intermediaries were carriers or third-party administrators (94 percent). Nearly seven out of ten employers also noted that they use a pharmacy benefits manager (69 percent). Other options included reinsurers, internal management, and specialty vendors.

For drug pricing and management, the top strategies that employers have utilized in 2022 were medical therapy management, pharmaceutical drug transparency or pass-through pricing, and copay maximizer programs.

Looking to the future, 43 percent of respondents said that they would use medical benefit drug transparency. A little more than a third of employers indicated that they planned to use drug reference-based pricing in the next couple of years (34 percent). More than 75 percent were planning to implement or considering biosimilar pharmacy drug strategies.

Nearly all employer respondents found hospital prices to be unreasonable and most respondents cast some of the blame on hospital consolidation, saying that the increase in consolidation has not improved healthcare costs. Separate research on this role of consolidation in rising costs has offered mixed results.

The results found that having more information about hospital pricing increased employers’ disavowal of healthcare prices’ defensibility. Employers who were familiar with RAND data on hospital pricing practices were 10 times more likely to strongly disagree that hospitals’ pricing practices were defensible.

Employers responded to hospital pricing practices with a few strategies, including tiered networks, site of care, and centers of excellence.

Regarding whole person health, almost all employers indicated that they either currently employ a whole person health strategy or expected to employ a whole person health strategy in the next few years (90 percent). In this area, employers are particularly focused on high-value care and care for individuals with multiple chronic conditions, which can have a serious impact on spending.

Health equity is also a huge factor in employers’ pursuit of whole person health. Two out of five employers are reviewing the role of their company policies in health equity. A third of employers say that building health equity accountability is a part of their strategy in the next couple of years.

In addition to these internal strategies, employers advocated for policy changes. In particular, 82 percent of employers supported drug price regulation and 79 percent were open to surprise billing regulation.