New survey: Needle starting to move on alternative medical plans 

Despite higher healthcare cost trends, fewer than half of large employers (those with 500 or more employees) are likely to take cost-cutting measures next year like raising deductibles or copays, according to Mercer’s new Survey on Health and Benefit Strategies for 2025, with nearly 700 employer participants.

Heading into 2025, employers face the challenge of addressing sharply faster cost growth while keeping healthcare affordable for their workers and offering a competitive benefit package. The survey found that medical plan options that save money by steering employees to quality, cost-efficient health providers — and potentially offer members more affordable coverage – now have significant traction with employer health plan sponsors. These plans take different forms, but over a third of large employers (36%) are now utilizing high-performance network plans or other alternative medical plans, and 29% are considering it in the near-term.

One reason these plans are likely to grow is that high performance network products with a more national coverage area continue to expand into additional markets, with a general focus on major urban markets. Regional health plan offerings such as HMOs and ACOs have the potential to work well for an employer with a large percentage of their population within the plan’s service area.

The leading edge of innovation

New, independent vendors are constructing high-performance networks and alternative reimbursement methods to compete in the large-employer market. Vendors like Centivo, Firefly Health,  Imagine 360 and XO Health strive to offer a materially different value proposition when compared to national carriers and each other. While only 2% of large employers will offer one of these independent health plans in 2025, it’s notable that 11% are considering them. Variable copay plans take a different approach from national carriers, eliminating deductibles in favor of copays that vary by provider, incentivizing members to seek less-expensive care. These copay-based health plan options have begun to take hold in the market over the past few years; they are now offered by 7% of large employers, with another 18% considering them.

Among these new health plan options coming to market, we are seeing common themes where plans seek to differentiate themselves in one or more ways:

• Price certainty for consumers for healthcare services
• Data-driven recommendations for where to get care, based on quality and cost, delivered by digital and customer service advocates
• Virtual-first primary care
• Members pay out-of-pocket charges to the administrator rather than the health provider
• Patient management led by primary care physicians

Confronting the barriers to actions

While many large employers have implemented or are considering a high-performance network or alternative health plan, others haven’t made it a strategic priority. The survey found that the most common reasons these employers gave for not considering a non-traditional medical plan option were that they prefer a consistent offering nationally and that they believe it will be too disruptive to plan members.

In addition, a substantial number say they have other priorities, or have yet to dig into the opportunity. While HR benefit teams do have a many competing priorities, it is important to consider the intrinsic cost of not exploring high performance networks or alternative health plans. Health benefit cost trends are running higher than inflation and average wage growth and will continue to do so. Can employers afford the status quo over the long-term?

Many large employers indicated they want a consistent offering nationally. If this is a key priority, then an employer could explore the newer variable copay health plan options or high-performance network products offered by certain national carriers that can backfill with their broad network as needed in some geographies for a consistent national offering. Further, while considering disruption to members is important, it shouldn’t mean avoiding change entirely. A high-performance network option could be offered as a choice at enrollment that provides a richer benefit design or lower payroll contribution option as a tradeoff for the different network.

Additionally, the prevalent variable copay plan options are built on top of national broad network options, so in most cases provider disruption would be minimal.

With healthcare cost growth on the rise, it’s important to learn more about the pro and cons of each of these options and how they might add value. When the potential savings are better understood, it may become clear that — despite the challenges that come with change — the cost of inaction is too high.