According to a new report from the Business Group on Health (BGOH), self-insured employers say that their healthcare costs are rising rapidly, with the costs of drugs, including expensive new weight-loss drugs, likely to have a long-term financial impact.

How employers currently feel about healthcare

For the report, BGOH surveyed 152 employers that cover 19 million workers on their healthcare-related insights and potential future investments between June 1 and July 18.

According to the report, healthcare costs have increased significantly over the last few years. In 2021, the average per-capita cost for healthcare (employer and employee combined) was $15,412, which then increased to $15,862 in 2022 and $17,201 in 2023.

In addition, employers said they expect healthcare costs to continue to rise over the next few years, with costs potentially increasing by 6% in both 2023 and 2024 after plan design changes. 

One of the biggest drivers of healthcare costs is cancer. Half of employers said cancer is the number one driver of healthcare costs while 86% said it was in their top three. Other top drivers include musculoskeletal conditions, cardiovascular conditions, and diabetes.

The high cost of prescription drugs has also significantly impacted costs and affordability. In 2021, a median of 21% of healthcare dollars was spent on pharmacy, which increased to 24% in 2022. Over 90% of employers said they were concerned or very concerned about high-cost drugs and the trend of increasing pharmacy costs overall.

New and expensive weight-loss drugs are also likely to drive up pharmacy costs over the next few years. According to GoodRx, weight-loss drugs like Novo Nordisk's Wegovy can cost more than $10,000 per year per patient, and this high price tag has led some insurers to limit access to the treatments even as demand soars.

Almost all respondents said they cover these drugs for diabetes, which they were originally intended for, but only 46% said they covered them for weight loss. The cost of covering these drugs was a top pharmacy benefit concern for employers, with 85% saying they were worried about the long-term financial impact of these weight-loss drugs and similar medications.

According to BGOH CEO and president Ellen Kelsay, employers are unlikely to scale back on their current coverage of these drugs, but some might establish stricter eligibility requirements for coverage.

Meanwhile, employers are now more skeptical about the potential impact of virtual health on care. In 2021, 85% of employers said virtual health was going to have a significant impact on care delivery, but that decreased to 64% this year.

Many employers are growing increasingly concerned about the potential downsides of virtual care. For example, 70% of respondents said a lack of coordination between community-based and virtual providers could lead to a siloed care experience, and 54% said they were concerned about the quality of virtual care.

"Companies will need to creatively and deftly navigate these and other challenges in the coming year, especially as they remain committed to providing high-quality health and well-being offerings while managing overall costs," Kelsay said.

What employers have planned for the future

According to the report, 77% of respondents said improving access to mental healthcare would be one of their top focus areas for 2024. Some potential changes include offering no or low-cost virtual counseling for employees, no or low-cost on-site mental health counselors, and out-of-network coverage for mental health and substance use disorder services.

"Mental health access is by far the top focus area for employers," said Brenna Shebel, VP of BGOH. "They're really looking to ensure that employees who need mental health support are getting the support they need through different networks [and] availability of programs."

To help contain costs and improve care quality, 87% of employers said they plan to prioritize transparency for prices and quality data. Many employers are also evaluating their current partnerships with vendors to ensure they will deliver value and cost-effective services.

Many employers also plan to improve health equity going forward. Eighty-six percent of respondents said they plan to collaborate with employee resource groups to promote benefits and well-being initiatives for certain groups, and 61% said they will require health plan and navigation partners to offer directories of healthcare and mental health providers. In addition, 85% of employers said they will implement at least one strategy to support the health and well-being of LGBTQ+ employees, such as expanding fertility benefits and lowering cost sharing. (Hooper, Politico Pro [subscription required], 8/22; Perna, Modern Healthcare, 8/22; Plescia, MedCity News, 8/22; Business Group on Health press release, 8/22; Business Group on Health executive summary, 8/22)