Study: Why employers expect to be offering health coverage for the long haul

Despite rising costs, employers will continue to offer healthcare coverage to their workers, and they don’t see that ending anytime soon, if ever, according to a report by the Employee Benefit Research Institute (EBRI).

As one of the benefits managers the EBRI interviewed for the report put it: “We’ve been saying for a long time that costs are unsustainable, but apparently they’re sustainable. We’ve always made it work.”

Paul Fronstin, Ph.D., EBRI’s director of health benefits research, told Fierce Healthcare responses like this don't surprise him.

“I’m coming up on my 30-year anniversary EBRI. For 30 years, employers have been kicking and screaming about the cost of healthcare," Fronstin said. "And they’ve been saying, ‘five or 10 years from now, the cost will be unsustainable.’ Why are we still five to 10 years away from that? And I think it’s for a couple of reasons, one being that they realize, despite the cost, they can’t simply get rid of it.”

Predictions that many employers would steer workers to plans offered on the Affordable Care Act (ACA) marketplace didn’t come to pass for multiple reasons identified in the report, including a sense of obligation to provide these benefits.

In addition, employers think that they could offer better deals than ACA plans, and, though employees voiced a desire to have more options, the study found that an increase in options confused workers rather than empowered them.

"Every survey we’ve done says that our workers want more choice, but when that choice comes, they want us to choose for them," a benefits executive at a telecommunications company said.

EBRI worked with researchers at the Commonwealth Fund to conduct interviews with 26 business executives who oversee healthcare coverage at their companies. Those companies came in all sizes, employing anywhere from 300 to 250,000 workers. Collectively, they covered more than 1.2 million people and spent over $6.5 billion on health benefits in 2021.

The report found that private healthcare exchanges didn’t catch on, either, for reasons that mirror those that hindered moving employees into the ACA marketplace. Respondents felt that they could better control costs than plans on the private exchanges.

Individual coverage health reimbursement accounts also don’t seem to be a major part of the conversation as most respondents weren’t familiar with them, according to the report.

“Employers that adopted these provisions may have been motivated by a desire to lower barriers to low-cost preventive care and reduce the probability of high-cost claims,” the report said. “By giving workers ICHRAs to purchase insurance on public exchanges, companies effectively forfeit this control.”

Every large employer offers health benefits, Fronstin said, and no company wants to be the first to drop it in a tight labor market. In addition, employers said they feel that they will be financially on the hook in some way no matter how healthcare evolves, so the status quo at least gives them some control.

If they give employees money to buy insurance on their own, employers will still be paying for it, they said. And if a single-payer system ever becomes reality, employers said they feel that, ultimately, they’ll be paying for that as well.

“Single payer, or 'Medicare for All,' is really a fancy name for ‘I’m going to tell you what I’m going to pay and that’s it. Take it or leave it.’ And that’s where the savings come from,” said Fronstin.

Employers said in the interviews that they feel they can do a better job than the government at innovating and customizing benefits, as well as being in a better position to pivot when needed. 

“They still care about their employees,” Fronstin said. “They don’t want them in the hospital. They want to make sure that diabetics are taking insulin.”

Employer-sponsored health insurance covers more than 70% of workers, 53% of children and 36% of nonworking adults in the U.S., according to the report.

While employers expect to be in it for the long haul on benefits, one area they'd feel comfortable stepping back and letting the government take over is pharmaceutical prices, especially for specialty drugs. Many executives echoed that sentiment, and also expressed concerns about the role of pharmacy benefit managers.

A benefits executive at an insurance company: “Pharmacy benefit managers are making everything opaque, and they’re getting kickbacks for steering things one way or the other," said a benefits executive at an insurance company. Consultants aren’t aligned with you, there are inherent conflicts of interest.

"[they’re] doing what’s best for themselves," the executive said in the interview.

Fronstin said that employers were asked if they would welcome government assistance when it came to controlling costs and over 85% said yes.

“We decided to push on that, asking ‘What would you support?’” said Fronstin. “The only thing that they really volunteered was help with controlling the cost of medications. That’s keeping employers up at night. We’re now at the point where specialty drugs account for 50% of total drug spend, despite the fact that they only account for 2% of prescriptions written in the U.S.”

It’s possible that employers will push the Food and Drug Administration to approve more biosimilars faster, according to the report. The FDA has so far approved 36 biosimilars, notably those targeting Humira, one of the world's most popular drugs and one that alone accounts for billions in annual spending.

“There’s been like 600 biologics that have been approved and just a handful of biosimilars,” said Fronstin.

Biosimilars also don't represent a panacea. While biosimilars are less expensive than the reference drug, they don’t come cheap, Frostin said.

The EBRI report also noted that benefits managers are skeptical of consolidation among provider systems.

“There is even more unrestricted play with prices in health care delivery, and it leads to some bad behavior … that’s the kind of power that consolidation has allowed," said a benefits executive at a technology company.

Fronstin said consolidation takes place on several levels. For one, there are hospitals buying hospitals and becoming bigger systems. But it also extends to hospitals scooping up physician groups and practices.

Employers are all too aware of these trends, he said.

“The fact is that the supply chain in some respect is getting smaller, in terms of the number of players and employers can’t get any bigger to negotiate," Fronstin said. "So, they’re concerned about anything that puts them at a disadvantage when it comes to setting rates.”