CHICAGO (Oct. 6, 2019) – Aon plc reports that its large employer clients budgeted an average of $11,891 per enrollee for health care costs this year, up 3.2% from 2018, according to an analysis of the firm’s Health Value Initiative database, which captures information for more than 500 large employers representing 5.25 million lives and $62 billion in annual costs. Employers were successful at mitigating higher underlying medical cost trends through plan design changes, network strategies, vendor negotiations and other initiatives.

The analysis also shows employers are passing along a lower 2.1 percent premium increase to employees, absorbing a larger 3.5 percent increase to company costs in 2019. Plan costs represent the employer’s and employee’s combined premiums for medical and prescription drug costs but exclude employee out-of-pocket deductibles, copays and coinsurance. On average, employers will subsidize about 78% of the plan cost, with employees paying the remainder.

Aon’s clients are successfully bending the health care cost curve by optimizing delivery of care and guiding plan participants to preferred providers, better drugs, appropriate site of care and relevant programs. Employers also proactively leveraged financial measures with pharmacy vendors. Although gross prescription drug trends remain high, many companies significantly reduced their overall prescription drug costs through aggressive negotiations for discounts and rebates and through better utilization management and controls. These decisions will help large employers beat underlying trends for employer medical benefit costs, which are forecasted to rise 6.5 percent, according to the firm’s 2020 Global Medical Trend Rates Report.

“Employers need the talent to compete for innovation, revenue and other key areas of organizational success,” said Yuliya Kandratsenka, vice president and the lead of Aon’s trend team. “Health care benefit strategies can no longer be about cost-shifting to members. Employers instead are managing providers and vendors more diligently and focusing resources on those with multiple chronic conditions.”

U.S. Health Care Budget Trends from 2018 to 2019

Employers also focus on “total cost of care” as part of their benefit strategy, which includes the employer subsidy, employee contribution from paycheck and employee out-of-pocket costs.

From a total cost of care perspective, costs are projected to be $13,918 per active employee this year, a 2.9 percent increase from 2018. On average, the employer cost-share will be 67 percent of the total cost of care.

Slight increase for employees in 2019

Employees are contributing about $4,628 for healthcare coverage this year, of which $2,602 is paid in the form of premiums from paycheck and $2,026 is paid through plan design features such as deductibles, copays and coinsurance.

Over the past decade, many companies implemented high deductible health plans to help foster consumerism around healthcare choices and notably reduce overall healthcare costs. In recent years though, plan design changes have been more modest, with less of an impact to employees.

Employers are increasingly looking to manage cost increases through means other than shifting cost onto employees. The majority of cost increases are expected to come from high cost claimants (where a common rule of thumb is that 20% of claimants generate 80% of medical costs) and from specialty drugs (a market expected to account for half of the U.S. prescription drug spend by 2020 and grow exponentially each year), according to Aon data.

“Affordability of health care is already a major challenge,” said Will Sneden, U.S. Health Solutions practice leader for Aon. “Employers are having to be more creative with their health strategies to control costs and use more insightful tools to help them make better decisions, both for themselves and for their employees.” 

This year the firm expanded access to Aon Architect®, a distinctive web-based analytical tool that helps clients balance employee satisfaction with health benefit costs. It enables quick identification of the most cost-effective and attractive benefits across 500,000 different combinations. Plan recommendations are produced based on clients’ population demographics and Aon's proprietary employee perception score, a first of its kind capability that allows users to balance employee appreciation with cost impact. Analysis and recommendations can be customized in-person with a client in seconds. Aon Architect addresses medical, pharmacy and medical-related elective benefit designs, as well as various contribution strategies.

“Using the Aon Architect® solution, we are able to harness machine learning techniques to develop medical strategies which balance both budget needs and the employees’ perception of the medical offering,” said Rebecca Puccetti, senior vice president, U.S. Health Solutions consulting actuary for Aon. “Architect identifies ways to maximize employee satisfaction with health care plans while meeting an employer’s budget target, a true balancing act. This helps employers to better spend health care dollars where they count.”

Another unique area of focus involves leveraging an employer’s health care data beyond typical benchmarking techniques.  Powered by machine learning technology, Aon’s Cost Efficiency Measurement rigorously matches an employer’s healthcare data to a national dataset, resulting in an objective, unbiased analysis of how an employer’s claims compare to their peers. These insights help identify if vendors truly are effectively managing complex members and high cost claimants as compared to market. 

Aon also recommends that employers carefully strategize their approach to specialty drugs:

• Ensure appropriate usage of specialty drugs.  This includes implementing prior authorizations to protect against off-label usage and ensuring they are administered in accordance with national clinical guidelines.
• Coordinate specialty drugs with the medical plan.  Due to the serious nature of some health conditions, many specialty drugs are administered through the medical vendor (not the prescription drug vendor).  Employers should confirm that claims are handled consistently between vendors.
• Evaluate opportunities for steeper discounts and rebates.  Some standalone specialty drug vendors will offer larger discounts than the current pharmacy benefit manager. Formularies may need to be adjusted to steer usage toward particular drugs.
• Consider changes to member cost-sharing which drive utilization toward lower cost settings without putting undue burden on the consumer.

Aon’s health care data source

The historical information and projections shown above were developed using Aon’s Health Value Initiative database, which captures healthcare costs and benefit designs for 521 large U.S. employers representing 5.25 million employees, more than 1,300 plans, and $62 billion in 2019 healthcare spend.  Note that the projections above are developed after taking plan design changes and vendor negotiations into account.

* Based on the weighted average cost of clients participating in Aon’s analysis.

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About Aon
Aon plc (NYSE:AON) Aon is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance. Aon has five specific global solution lines: Commercial Risk Solutions, Reinsurance Solutions, Retirement Solutions, Health Solutions and Data & Analytic Services.

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Media Contact:
Robert Elfinger, robert.elfinger@aon.com, 312-381-0071