Many U.S. businesses are bracing for the sharpest rise in health care costs in more than a decade, with employer coverage costs expected to jump nearly 10%, says Melissa Koontz, senior vice president employee benefits at the Spokane office of Alliant Insurance Services Inc.

“Health care costs are rising at a much higher rate this year than they have in the past,” she says. “I wouldn’t say it’s from one particular reason. We kind of have this perfect storm brewing, and it just continues to get worse and worse.”

Coverage costs are being driven higher for employers due to specialty drug inflation, chronic disease care, later-stage diagnoses, provider shortages, and delayed care, she says. 

Health care cost increases have historically been a little bit higher than typical consumer inflation, Koontz explains. 

“There are a lot of factors that are contributing to that. … We are not the healthiest population in the world. We have high rates of obesity. We have a sedentary lifestyle with a lot of desk jobs. That doesn’t improve health. And there’s an increasing rate of chronic disease and later-stage diagnosis of cancer and different chronic diseases," says Koontz.

Employer health care coverage cost increases have previously hovered between 6% and 7%, Koontz says, but are now climbing to 8% to 15%, with some employers seeing renewal increases as high as 60%.

“The highest renewal we had this year was 60%, which is absolutely outrageous,” she says. “It is completely not sustainable for employers. The hardest part is that everybody would like for somebody to be to blame for those massive increases in costs. But we’re facing all of these really hard realities of health not getting better. And these miracle treatments that are coming out cost a lot of money, and people are living longer.”

One major driver of higher health plan costs has been specialty drug inflation. For example, Koontz notes, Stelara — a prescription drug for Chrohn’s disease — can cost between $13,000 and $15,000 per month. For many employers, she says, the question is no longer whether costs will rise, but how to absorb the impact without harming employees or jeopardizing retention.

Spokane-based URM Stores Inc., which has 3,000 employees across its subsidiaries — including URM Cash & Carry stores, Rosauers Supermarkets, and Peirone Produce Co. — implements solutions to benefit both the employer and employees, says vice president of human resources at URM, Elizabeth Bartch.

“We employ both union and nonunion employees across multiple industries and states,” Bartch says. “I just returned last week from the International Federation of Employee Benefits … and what was fascinating, is that the same cost pressures are affecting these union plans — large ones and small ones — and mirroring what we’re seeing in our nonunion, self-funded plan.”

Bartch concurs with Koontz in that inflation, specialty drug growth, costs related to delayed post-pandemic care, and catastrophic claims are pushing expenses upward.

Despite these pressures, Bartch says URM has avoided large employee premium increases — raising contributions by only “one or two dollars” this year. URM’s strategy, she says, is to use the flexibility of a self-funded plan before passing on costs to employees.

“We leverage our self-funded flexibility to innovate and try to get creative,” Bartch explains. “We’ve done a few things but our goal, our basic goal, is to protect the benefits of our employees … while ensuring long-term sustainability for the company.” 

Last year, URM added a high-deductible health plan with a health savings account, or HSA, contribution in addition to its preferred provider organization, or PPO, plan.

“This high-deductible plan has lower costs for the employee versus the PPO, but our PPO is still awesome,” Bartch says. “The high-deductible plan gives them an option for lower premiums depending on their financial situation.”

For healthy mid career employees, the HSA is beneficial as it also functions as a retirement vehicle, she says. 

“If (employees) are not using the plan frequently, they can get a monthly contribution from the employer that they can invest and grow that money, and they get to take that with them,” Bartch says. 

Flexible spending accounts also help employees cover copays and coinsurance with pretax dollars, that Bartch says offers another method to keep costs affordable.

Following a sharp rise in pharmacy claims, URM has partnered with its broker to launch a mail-order pharmacy program for specialty medications.

“Instead of paying a $50 monthly copay, (employees) can now get a 90-day supply with no copays and the company … can save between 20-30% per prescription,” Bartch says.  

URM has also revamped telehealth services to offer zero copays. Bartch says that utilization of the service is still growing, but education efforts are underway to show employees how virtual care can reduce costs and increase convenience. 

For employees facing serious health conditions like cancer, URM has implemented a program dubbed Carebridge, which provides intensive support and eliminates premiums and out-of-pocket costs for the entire family, Bartch says.

“What it does for the plan is we get bigger discounts … and it sort of does a stop-loss (that protects) the rest of the company,” she says. 

“Rising health care costs are inevitable,” Bartch says. “But the way we respond doesn’t have to be. So we’re investing in smarter strategies today so we can continue delivering high-quality, affordable care tomorrow for employees, and that’s what long-term stewardship looks like.”