Keeping Health and Benefits Plan Costs under Control for Pharmaceutical Companies

Employer-sponsored health and benefit plans have moved from “fringe” or “nice-to-have” to being a central pillar of the employee value proposition. In response, the variety and sophistication of products in the market has grown, and the costs of employer-sponsored health plans are climbing rapidly. According to the Mercer Marsh Benefits Health Trends 2020 Insurer  Survey, the 2020 projected medical trend rate  in the Middle East and Africa (MEA) region is 10.9%, and more than 70% of insurers in MEA are expecting this rate to increase in 2021. 

Most employers try to manage costs once per year in conjunction with the annual renewal of insured benefits. While modest year-on-year changes are important for keeping plans within budget, they do not typically make a long-term dent in cost growth especially as people risks continue to have an impact on business risks and the bottom line. Businesses within the pharmaceutical industry are therefore seeking ways to economize and improve efficiencies in their health-related plans in order to manage medical costs more effectively over the long term.

Key drivers of benefit costs for pharmaceutical companies include:  

• Digitization is changing business operating models and creating a need for new talent
• Changing lifestyles and demographics leading to chronic illness drives benefit utilization
• Changes in ways of working mean that employees are perceiving and using benefits differently, with increased demand for wellness and mental health benefits as well as digital health for example
• A lack of regulation and mechanisms to control practices such as referral-for-profit that lead to unnecessary diagnostics and hospital stays 
• Plan and payment incentives that drive inflationary practices and behavior

To maintain balance between attracting and retaining talent while maintaining costs, employers must identify the market factors along with the employee and provider behaviors responsible for driving health benefit cost increases. Doing so will allow employers to develop effective, value-based cost-containment strategies that provide access to quality care while eliminating or managing risks. In turn, employers will have a much easier time making the necessary decisions to ensure their benefits plans are financially sustainable.

The three main strategies for cost containment are: 

1. Design for value — through coverage provisions, network configuration and engagement.
2. Manage health risk — through a data-driven approach that promotes a healthy workforce.
3. Drive efficiencies — through smart financing and placement.

To bend the curve, companies need multipronged and multiyear strategies that address these three points simultaneously. The more affordable the plans are, the more you can open eligibility to a broader set of the workforce — which benefits everyone.

Businesses should consider providing voluntary and flexible benefits as they are a key way of managing costs as they allow for a more customized suite of benefits to members whilst controlling the basic company sponsored medical cover offered. 

At the same time, companies should be looking at a variety of vendors that can support effective delivery of interventions that will provide value to their workforce, such as investing in digital technologies, EAP and wellness programs. Insurers and advisors should also be encouraged to think outside the box and challenge the status quo.

Click here to read our point of view paper on ‘Balancing Cost and Empathy in Employee  Benefits – Keeping health and benefits plan costs under control’ to learn how you can manage your medical costs more effectively.