August 23, 2022

Although employers made few changes in plan design and eligibility in 2022, they did take on more of the cost of rising premiums. Prescription drug costs continue to rise. Concern about costs is growing, but opportunities exist to implement tactics to control them.

Few Changes in Plan Design

For 2023, most employers are not making any major plan design or eligibility changes (Figure 4.1). In a trend noted last year, employers are continuing to implement or expand high-performance networks (HPNs). Although consumer-directed health plans (CDHPs) continue to be the highest enrolled plans, the numbers have been slowly declining since 2019, moving from 55% to 52%. On the other hand, preferred provider organizations (PPOs) are making gains as the highest enrolled plan in the relative near future, going up from 38% in 2019 to 44% in 2022 (Figure 4.2).

CHDPS Maintain While Move Toward Plan Choice Grows

For the fifth year in a row, full replacement (i.e., CDHPs offered as the only option) has declined, while more employers are bringing choice back into their lineup. In 2023, 75% of employers will offer CDHPs as an option, up three percentage points from 2022 (72%) and eight points from 2021 (67%). The percent of employers offering full replacement declined slightly, moving from 14% in 2022 to 13% in 2023. Median enrollment in CDHPs remained the same, at 50% for the last 2 years (Figure 4.3).

Cost-sharing Arrangements

To help with the rising costs of health care, employers increased their cost sharing for premiums for employees only, from 80% to 82%. This increase covers PPOs and CDHPs, and the numbers may vary between these two types of plans. Employees’ share went down, from 20% to 18%. Cost-sharing for families, as well as in-network deductibles and in-network out-of-pocket costs, remained the same (Figure 4.4).

Pharmacy Plan Design

Prescription drug costs continue to be a major concern for employers. Total health care cost attributed to pharmacy spend went up slightly between 2020 and 2021, increasing from 20% to 21%. As was found in 2020, specialty pharmacy alone made up 12% of overall health care spend. This amounts to over 50% of an employers’ drug spend dedicated to specialty pharmacy - illustrating the immense role specialty drugs play in employers’ overall health care cost strategy.

For the first time, employers were asked what percentage of overall pharmacy spend goes through the medical plan, an increasingly urgent area of focus due to the increased level of cost share paid through the medical plan. Employers reported that 20% of overall pharmacy spend goes through the medical plan (Figure 4.5).

As prices continue to rise, most employers—87%—think that competition within the prescription drug market is needed in order to keep prices affordable. To accomplish this goal, 62% of employers believe that a combination of market-based and government solutions is needed, the same number as in the prior year (Figure 4.6).

Prescription Drug Costs a Major Concern, Yet Opportunities Remain

When employers were asked about their major pharmacy concerns, cost topped the list. Overall pharmacy trend, as well as patient affordability for maintenance medications and specialty drugs, are all part of the cost problem (Figure 4.7).

Employers are aware of tactics that can help control costs in the areas of specialty pharmacy and high-cost therapy. For example, two approaches to manage specialty medications—prior authorization and site-of-care management—are gaining traction. Ninety-six percent of employers use prior authorization (whether the claim goes through the pharmacy or medical benefit), while 67% use site-of-care management strategies. However, there are other cost-saving tactics (Figure 4.8) that have not been widely deployed and may be good options for employers to consider in the future.

Utilization of cost-saving tactics for high-cost therapies is projected to continue to grow through 2025. By then, the number of such therapies on the market will be significantly higher, making these strategies increasingly impactful. For example, the use of the tactic to delay inclusion at launch so that the PBM can determine safety and efficacy has increased steadily since 2020, rising from 26% to 46% for 2023 to 60% projected in 2024/2025. Other tactics follow a similar upward trajectory (Figure 4.10).

Shifting Away From the Rebate Model

Although employers have long expressed a desire to improve upon the rebate model, little progress has been made in this area. Alternative pricing models are based on the net price of medications (i.e., list price minus rebates, discounts and fees) and emphasize transparency. In 2022, 40% of employers noticed “slight” industry progress in creating alternatives to the rebate status quo, down from 49% in 2021. Another 32% reported “moderate” progress, an increase from the 26% noted last year. But 23% of employers said that no real progress has been made, about the same number reported in 2021 (Figure 4.11).

Numerous barriers stand in the way of reducing the impact of rebates on pharmacy contracting and gross-to-net price. Many stakeholders benefit from the rebates, decreasing the motivation to make significant changes. Nonetheless, as the numbers of those making progress have been rising each year, it is likely that employers will look to adopt alternative pricing models in the years to come.

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