Press Release

U.S. employers expect health care costs to increase 5.0% in both 2016 and 2017

Willis Towers Watson survey finds cost pressures lead to modest plan changes in costly services

August 8, 2016
| United States

ARLINGTON, VA, August 8, 2016 — Employers expect total health care costs (both employer and employee) to increase 5.0%1 in both 2016 and 2017, up from 4.0% in 2015, according to early findings from the 21st annual Best Practices in Health Care Employer Survey by Willis Towers Watson (NASDAQ: WLTW).2 In absolute dollars, employers expect average employee per-year costs to rise to $12,338 in 2016 and nearly $13,000 in 2017. Despite these cost pressures, 81% of employers will make relatively modest changes to employee premium contributions and other cost-sharing provisions such as deductibles and out-of-pocket limits for 2017.

“With employee affordability concerns paramount, in 2017 employers will focus primarily on changing coverage provisions for costly services to manage cost,” said Julie Stone, a national health care practice leader of Willis Towers Watson. “These include more restrictive pharmacy benefits, the continuing addition of surcharges for working spouse and dependent coverage, and offering incentives to encourage employees to use centers of excellence for specialty services.”

The survey found that nearly nine in 10 (88%) employers identified managing pharmacy spending generally for high-cost specialty drugs specifically as their top priority over the next three years. Planned actions include:

  • Ensuring appropriate utilization. Today, 61% of employers have added programs to ensure appropriate use of high-cost drugs, up from 53% in 2015; 85% are considering doing so by 2018.
  • Addressing specialty pharmacy spending that occurs through the medical benefit plan. Today, 39% of employers have adopted this strategy, up from 26% in 2015; 82% will consider it by 2018.
  • Differentiating benefit coverage to influence site of care. Today, 19% of employers have made such changes; another 43% are considering them for 2018.

The survey also showed that dependent costs remain a focus. Today, 28% of employers have already reduced spousal subsidies by adding surcharges for coverage when it is available through a spouse’s own employer. The percentage of employers adding a working spouse surcharge is expected to nearly double by 2018. The average surcharge is now about $100 per month in addition to required premium contributions.

According to Trevis Parson, chief Health and Benefits actuary for Willis Towers Watson, as a result of significant changes in the U.S. health care delivery system, in addition to changes in coverage for costly services other cost-saving measures employers plan to implement include:

  • Increasing enrollment in high-deductible health plans with tax-advantaged savings accounts, with more employers moving to full replacement; by 2018, nearly half (49%) of employers offering an account-based plan expect that to be the only choice available to employees
  • Encouraging use of centers of excellence that have proven quality outcomes for treating back, knee, cardiac and infertility issues by offering incentives
  • Moving to benefit designs that require employees to participate in other health-related activities to reduce employee cost-sharing

“Although cost management is always a focus, over the next 12 months employers also will be seeking to modernize their benefit offerings to appeal to a multi-generational workforce,” added Parson. “The 2017 open enrollment period will begin to showcase some of the changes, including expanded choice of core medical and voluntary benefits, greater use of technology for decision support and an enhanced, consumer-style benefit shopping experience.”

About the survey

The Annual Willis Towers Watson Best Practices in Health Care Employer Survey was completed by 600 U.S. employers between June and July 2016 and reflects respondents’ 2016 health program decisions and strategies and, in some cases, their 2017 and 2018 plans. Respondents collectively employ 12.2 million full-time employees and operate in all major industry sectors.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 territories. We design and deliver solutions that manage risk, optimize benefits, cultivate talent and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at


1. Projected cost increases for 2016 and 2017 are after plan changes; projected increases without plan changes are 6.0%, up from 5.0% in 2015.

2. Projected cost increases are for actual costs, not actuarial equivalent rates.

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