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Employers remain focused on controlling healthcare costs

By Jeff Levin-Scherz, MD | November 30, 2023

Our population health leader weighs in on our recent healthcare survey findings, GLP-1 medication costs, telemedicine data and more.
Health and Benefits|Benessere integrato

Controlling healthcare costs is a top priority for U.S. employers, according to our annual Best Practices in Healthcare Survey.

Our survey received responses from 457 companies with a total of 7.3 million employees across a wide distribution of industries and geographies. The findings show that employers are highly focused on controlling healthcare costs (69% put this in top five priorities) and improving mental and emotional health offerings (63% put this in top five priorities).

Respondents predict a 6.4% increase in premium costs in 2024, and 39% project healthcare cost increases between 5% and 10% for the next three years. Most respondents (62%) intend to split their focus between cost management and talent management.

Eighty-eight percent of employers are confident they will continue to offer healthcare benefits to active employees in 10 years, the highest level since we started asking that question in 2009.

Other key points:

  • Interest in virtual care and navigation assistance is high.
  • 38% of respondents cover GLP-1 drugs for obesity, but about 10% are using higher body-mass index (BMI) requirements than recommended by various specialty societies (such as the American Gastroenterological Society and the < Endocrine Society).
  • 48% use a center of excellence associated with their health plan, and 10% use a carve-out vendor.
  • 39% intend to perform a mental health parity audit in 2023, and 24% have planned or are considering one in the next two years.
  • Value-based insurance design is common in pharmacy benefits: 51% of employers report bypassing deductibles for high-value preventive medications, and 47% report exclusions or higher cost sharing for low-value medications.

Implications for employers:

  • Most respondents have concerns about increasing premiums. Because of the tight labor market, employers are reluctant to pass premium increases onto employees or to reduce plan value.
  • Estimates of average increases next year are the highest in a decade. Some organizations may struggle to manage cost increases that are substantially higher than average.
  • Most respondents continue to seek solutions that increase mental health access for plan members, help improve navigation and comply with mental health parity regulations.
  • Many respondents expect to increase the amount of virtual care available to plan members.

What is the real cost of GLP-1 medications for obesity?

The New York Times reported last month that the net price obtained by pharmaceutical companies for anti-obesity drugs is a lot less than the list price. This analysis shows that the list prices of the GLP-1 drugs for obesity are from two to over four times higher than the net revenue received by the pharmaceutical company.

The article is based on a report from the American Enterprise Institute, which uses rolling-quarter averages of “net” price received by the pharmaceutical companies. The net price does not include dollars that might be retained by the pharmacy benefit manager, the wholesaler, or the local pharmacy – so the actual cost to employer-sponsored health insurance (even after rebates) remains higher than the authors’ estimates.

The New York Times article optimistically states, “Relief should be coming soon, health economists predict, with companies rushing to develop their own drugs. Competition may lead to lower prices.”

However, Lilly and Novo, the manufacturers of all four GLP-1 drugs commonly used for obesity therapy, are spending $3.5 billion this year to buy smaller companies with promising anti-obesity therapies, according to a recent article in The Financial Times.

So, I’m not so sure The New York Times’ conclusion is realistic. New entrants to this market could drive prices down. But if a few companies continue to represent virtually all the market, then they will maintain high prices, keeping the cost of these medications out of reach for many who could benefit from them.

Implications for employers:

  • When planning weight management programs and building future pharmacy budgets, employers should consider the significant rebates and discounts that are offered for GLP-1 drugs for diabetes and obesity. For instance, limiting coverage to those with higher BMI levels could mean forfeiting rebates and increasing cost per person treated.
  • Out-of-pocket costs paid by members is typically based on the drug’s list price (before discounts and rebates) unless rebates are passed through to members up front, which is uncommon. Manufacturer copay coupons to lower out-of-pocket costs are generally $225/month for those with insurance and available for a limited number of months.
  • Government antitrust enforcement can help make it more likely that prices will come down sooner for this valuable set of medications.

Telemedicine primary care visits could yield claims savings

Researchers at Kaiser Permanente of Northern California reviewed over 2.3 million primary care visits delivered to about 1.6 million patients from April 2021 to December 2021 and compared treatment and follow-up of virtual and in-person visits. (This period included the Delta wave of COVID-19.)

The index primary care visits were:

  • 49.2% in person
  • 19.5% via video
  • 31.3% via telephone

They found that medications were prescribed less often in video (38.4%) and telephonic (34.6%) compared to in-person visits (46.8%). They also found laboratory and imaging tests ordered only about half as often with virtual visits. The findings were published last month in Annals of Internal Medicine.

The researchers adjusted the results for a host of potentially confounding issues, including patient age and gender, previous illness, wealth, education level, internet connectivity of home ZIP code and distance from primary care physician’s (PCP’s) office. What they found was positive: Those who had virtual visits got fewer imaging and laboratory tests and fewer prescriptions.

Of course, patients who had virtual visits may have had a problem that was less severe than those who were seen in person. Prescriptions for antibiotics did not differ substantially.

Virtual visits were more likely to lead to in-person PCP visits within seven days, which raises the concern that some virtual visits are additive, rather than a replacement of in-person visits.

Another potential worry is that those who had telemedicine visits were more likely to be seen in an emergency department or hospitalized within seven days. This could be that in-person clinicians are able to avoid an emergency department visit because they could perform a full physical examination or make an office intervention. Higher hospitalization rates could be the direct result of a lower threshold to send patients to the emergency department for an evaluation.

These differences were statistically significant due to the large sample size, but they are very small.

Researchers did not assess patient satisfaction or effectiveness of care. Researchers focused on follow-up care for only seven days.

Results at Kaiser Permanente, a tightly integrated multi-specialty group, which offered virtual visits before the pandemic, might not be applicable to other practices.

Implications for employers:

  • The study shows there are potential savings from virtual visits (lower lab and imaging tests) within seven days of the index visit, and the incremental number of follow-up visits is small. The study does not answer the question of whether net costs are lower for patients who use virtual visits for primary care.
  • Clinicians did not prescribe antibiotics or other medications at a higher rate at virtual visits.
  • Employers can seek reporting on telephonic versus video visits. Video visits are likely of more clinical value, but most virtual visits in this study were performed by phone with audio only.
  • One in 12 (7.6%) virtual visits were associated with an in-person PCP visit within seven days. This is where virtual visits through a medical group could have an advantage over visits provided by a virtual-only provider.
  • Virtual visits are likely here to stay, and we’ll want to see further studies that will include patient experience and clinical outcomes.

Disparities in kidney transplants

People with advanced kidney failure need either a kidney transplant or dialysis. Kidney transplants are far better than dialysis; those who have successful kidney transplants will have longer lifespans and don’t need dialysis three times a week. Kidney transplants also cost far less than dialysis.

Unfortunately, there are not enough kidneys available for all who need transplants. There are over 100,000 on the waiting list, and the U.S. performs only 25,000 kidney transplants annually. Not everyone is placed on the waiting list equally, which is an important discrepancy because patients can’t get transplants unless they are on the list. Black people were 10% less likely to be on waiting lists compared to white people, and 21% less likely to be on waiting lists compared to Asian people.

However, those under 40 are most likely to be good candidates for dialysis. The researchers reviewed data on those under 40 who were started on dialysis from 2005 to 2019.

This data was from a period when physicians used an adjustment to kidney function calculators that made it falsely appear that Black people had less kidney impairment, but this does not explain the failure to place Black people on kidney transplant lists after they started dialysis.

Although those with end-stage renal failure qualify for Medicare 33 months after they start dialysis, the employer plan continues to pay dialysis claims until the member is on Medicare. Kidney dialysis claims are especially expensive for commercial health insurance plans, which frequently pay more than $100,000 a year even for in-plan dialysis.

Implications for employers:

  • Employers should check with medical carriers to be sure that plan members who are young and on dialysis are placed on kidney transplant waiting lists if they are eligible.
  • There are vendors who can help facilitate appropriate referrals to transplant.
  • This issue can be considered as part of a broader diversity, equity, and inclusion approach for employers.
  • Employers can also check to be sure that dialysis is being administered in plan, except in rare emergencies or if a member is traveling away from home.

Population Health Leader, Health and Benefits, North America

Jeff is an internal medicine physician and has led WTW’s clinical response to COVID-19 and other health-related topics. He has served in leadership roles in provider organizations and a health plan and is an Assistant Professor at Harvard Chan School of Public Health.

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