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Survey Report

Chapter 2 — Plan and financial management: Trends in health care contributions, premiums and benefit designs

2018 Best Practices in Health Care Employer Survey

Benefits Administration and Outsourcing Solutions|Health and Benefits

January 3, 2019

Find out how U.S. employers are managing health care costs and addressing employee wellbeing to achieve a healthy, high-performing workforce.


With health care costs rising faster than the rest of the economy, employers continue to address the challenge of changing plan design to control costs and keep health care affordable for employees.

Only a quarter of employers today review health care subsidies in the context of other benefits and pay (Total Rewards), but the prevalence of this practice is expected to jump to 40% within two years. About a third offer lower costs to employees who take specific steps (36%), such as participating in a physical wellbeing initiative like a health assessment, with 55% planning to do so by 2020. Just over a quarter use a defined contribution (DC) arrangement, with that figure possibly rising to 40% in 2020 based on those that are planning or considering it (Figure 6).

Furthermore, employers are considering value-based designs to improve quality and efficiency of care delivered. For example, almost a third of employers increase out-of-pocket costs for use of specific services that are commonly overused like going to an emergency room for a non-emergency condition. In the next two years, over half of employers expect to adopt such penalties. A similar approach that may see explosive growth is requiring second opinions. Currently only 5% of employers require employees who get certain types of medical procedures to pay a higher cost share if they do not first seek additional input, but in two years over a quarter of employers expect to adopt such policies.

The most widely used penalty to nudge behavior change remains tobacco surcharges, which average $600 a year. Currently 44% of employers either penalize tobacco users with higher premiums or reward them for quitting. Adoption of tobacco surcharges and incentives, however, may be reaching a plateau as this year’s figure remains the same as last year’s. While another 10% of employers indicated they might add tobacco surcharges or incentives in the next two years, the figure has remained at its current level for the last four years.

Figure 6. Trends in health care contributions, premiums and benefit designs

Chart: trends in health care contributions, premiums and benefit designs

Note: * “Planning for 2019”
^ “Considering in 2020”
Sample: Based on respondents with at least 1,000 employees
Source: 2017 and 2018 Willis Towers Watson Best Practices in Health Care Employer Survey

Icon: yellow star

Best practices: Subsidization

  • Review health care subsidies in the context of Total Rewards and organizational values.
  • Evaluate employee premiums and out-of-pocket costs for affordability.
  • Set contribution levels for members with dependents higher than for single members.
  • Apply spousal surcharge approach when other coverage is available.


While penalties may be effective nudges to change behavior, typically employees prefer rewards to penalties — with the exception of tobacco surcharges. Specifically, the use of incentives focused on driving program participation is on the decline having peaked in 2015 at 77% of employers, steadily declining to this year’s five-year low at 56%. Although some employers may be pulling back from offering rewards, those that still offer incentives remain committed and increased the maximum amount of money employees can earn by $304 a year — a 47% increase — between 2012 and 2018 (Figure 7).

Subsidization: Families pay more

Because family size impacts health care cost per employee, employers continue to pass the higher cost of family coverage on to employees, especially when spouses have coverage from their own jobs. Almost a third (31%) charge more to cover spouses when other employer coverage is available, rising from 27% last year (Figure 6). The higher family rates help avoid across-the-board increases to all employees.

Figure 7. Use of incentives plateaus

Bar graphs: Use of incentives plateaus

Note: Means include companies offering incentives to only employees or to employees and spouses

Chapter 2 — Plan and financial management: Trends in health care contributions, premiums and benefit designs
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