CHICAGO, Ill. (August 23, 2017) –Recent upticks in medical inflation, coupled with continued increases in out-of-pocket cost sharing, is likely to boost U.S. employees’ health care cost increases in 2018 to the highest levels in three years, according to a new actuarial analysis by Aon, a leading global professional services firm providing a broad range of risk, retirement and health solutions.

Aon’s analysis is the largest analysis of actual employer-based health plan results of its kind. The data is calculated using  Aon’s Health Value Initiative database, which captures health care cost and benefit data for over 450 large U.S. employers representing 10 million participants, more than 1,260 plans and $54 billion in 2017 health care spending.

Aon’s analysis found that after plan design changes and vendor negotiations:

• The average health care cost increase[1] for U.S. employees is projected to be 7.2 percent in 2018, up from 6.9 percent in 2017.

• Average health care costs for U.S. employees (including employee premiums and out-of-pocket costs) are projected to be $5,248 in 2018, up from $4,895 in 2017.

• Employee premium costs are projected to be an average of $2,678 in 2018. This is 18 percent of the total health care cost, which is consistent with cost sharing percentages over the past seven years.

• The average employee out-of-pocket cost is projected to be $2,570, representing 17 percent of the total health care cost. This is up from $1,258—or 12 percent of the total health care cost—in 2011.  

• Total budgeted health care costs per employee (including employer premium, employee premium and employee out-of-pocket) are projected to top $15,000 in 2018, up from $14,266 in 2017.

• After plan design changes and vendor negotiations, the average health care rate increase for mid-size and large companies was 3.9% in 2017. Aon is projecting that average health care cost increases for mid-size and large companies will be 4.5% after plan design changes and vendor negotiations in 2018.

“With the uncertainty around health care reform, companies have had to manage rapidly accelerating health care costs via cost-sharing and through other traditional strategies such as vendor re-negotiations and implementing narrow networks,” said Stephen Caulk, vice president and chair of Aon Health’s Trend Committee. “Our projections, as well as sources like the S&P Healthcare Index, demonstrate an acceleration in cost, which will likely rise at a faster rate for both employers and employees. Companies need to get bolder about adopting strategies and programs that enable them to manage cost for themselves and their employees, improve employee health and wellbeing and optimize the use of high-quality, lower cost providers within the health care delivery system.”

Prescription Drug Costs Jump

According to a separate Aon analysis comparing the first six months of 2016 and 2017, the gross cost of prescription drugs increased by 7 percent[2]. Brand name prescription costs increased 13.2 percent; however these increases were partially offset by the reduction in prices for generic drugs. Specialty drug spend increased as a percentage of overall drug spend from 35 percent to 40 percent and is expected to reach 50 percent of drug spend by 2019.  

“As brand name drug prices increase, we see an associated increase in drug manufacturer rebates,” noted John Malley, senior vice president and leader of Aon’s pharmacy consulting team.  “As the value of rebates increase, employers are seeking ways to receive the benefit of these rebates in a timelier manner.”

 

Employer Strategies for Mitigating Costs

A growing number of employers that offer health insurance through traditional, self-insured models are implementing a number of strategies to mitigate costs, including:   

 

• Controlling prescription drug costs through new and more aggressive strategies, including participating in a purchasing coalition, 4^th tier copay for specialty drugs and carving out specialty drugs from medical benefits

• Programs aimed at impacting chronic conditions. Aon’s research shows half of employers are considering adopting condition-specific high performance networks over the next three-to-five years.

• Adopting Center of Excellence (COE) strategies for certain non-transplant procedures (29 percent of employers have one today, and another 51 percent are considering it in the near future).

• Offering integrated delivery models (patient-centered medical homes or ACOs) to improve care delivery effectiveness (15 percent offer one today and another 54 percent are currently piloting them).

• Impacting the overall efficiency of the care delivery system by challenging the way employers pay for services and exploring options for value-based arrangements. Aon’s research shows that 20 percent of employers offer value-based insurance design approaches, and another 59 percent are considering doing so in the future.

 

ENDS

About Aon

Aon plc (NYSE: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.

For further information on our capabilities and to learn how we empower results for clients, please visit http://aon.mediaroom.com.

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Media contact: Maurissa Kanter, +1-847-442-0952, maurissa.kanter@aonhewitt.com 

U.S. Health Care Costs

Year	Total Cost	Total Plan Cost	Plan Cost (Employer)	Plan Cost (Employee Premium Share)	Employee Out-of-Pocket (OOP)	Employee Cost Premium Share + OOP
2018*	$15,040	$12,470	$9,792	$2,678	$2,570	$5,248
2017	$14,266	$11,934	$9,371	$2,563	$2,332	$4,895
2016	$13,598	$11,484	$9,019	$2,465	$2,114	$4,579
2015	$13,092	$11,143	$8,705	$2,438	$1,949	$4,387
2014	$12,520	$10,794	$8,483	$2,312	$1,725	$4,037
2013	$11,848	$10,341	$8,151	$2,190	$1,507	$3,697
2012	$11,342	$10,006	$7,914	$2,092	$1,336	$3,428
2011	$10,800	$9,542	$7,558	$1,984	$1,258	$3,242

*Projected

Total Plan Cost with Trend

Year	Total Plan Cost	Year over Year Trend
2018*	$12,470	4.5%
2017	$11,934	3.9%
2016	$11,484	3.1%
2015	$11,143	3.2%
2014	$10,794	4.4%
2013	$10,341	3.3%
2012	$10,006	4.9%

*Projected

 

Employee Cost Premium Share and OOP with Trend

 

Year	Employee Costs	Year over Year Trend
2018*	$5,248	7.2%
2017	$4,895	6.9%
2016	$4,579	4.4%
2015	$4,387	8.7%
2014	$4,037	9.2%
2013	$3,697	7.8%
2012	$3,428	5.7%

*Projected

 

 

About the Data

Aon’s data is derived from Aon’s Health Value Initiative database, which captures health care cost and benefit data for over 450 large U.S. employers representing 10 million participants, more than 1,260 plans and $54 billion in 2017 health care spending.