Health care costs have taken the lead as one of the costliest expenses for employees and employers alike. Employees are actively seeking better health benefits, however, 43% of employees struggle to afford their employer-sponsored plans. Employers are facing economic inflation with 95% reporting they may have to reduce benefits if renewal rates continue to escalate. This conflict between employees’ healthcare needs and employers’ financial concerns highlights the urgent need to tackle escalating health care costs and explore potential solutions that benefit both organizational health and financial well-being.
Contributing factors to rising health care costs
As health care costs are expected to continue rising, these forces are contributing to increasing expenses:
- Chronic disease: Conditions such as diabetes and certain cancers can affect all age groups. Forgoing care for chronic conditions can increase medical expenses and critical status of the disease.
- Aging population: Advances in medical research have increased lifespans, posing challenges for the public health system as seniors with chronic conditions drive up health care cost. This can lead to higher Medicare spending and greater expenses for employers.
- Differentiating needs: Tailoring benefits to a multigenerational workforce requires offering diverse health care plans and coverage for each age group, which in turn raises employer costs.
- Inflation: Overall economic inflation resulted in increased costs across the board. These prices have impacted hospital administrative costs, medical supplies, and technology, forcing doctors and hospitals to require more for the same care.
Reducing the rising costs
Employers recognize that cutting or reducing employee health benefits would worsen workplace morale, increase financial stress/anxiety, and impact overall health in their organization. To reduce these costs, employers have sought alternative strategies to manage spending expenses:
- High-performance networks (HPNs) have emerged as an effective solution for employers looking to manage health care costs, cutting expenses by up to 15%.
- Self-insurance has gained popularity among small and medium-sized businesses; when managed effectively with data-driven strategies, it can save employers up to 8% to 10% in expenses.
- Reference-based pricing establishes fixed maximum prices for medical services based on Medicare rates, enabling employers and their employees to avoid unexpected costs and save 20% to 30% while also allowing for better projections of future health care costs.
Employees require support to manage rising medical costs. By selecting the right benefits, employers can offer effective solutions to help their organization navigate the increasing cost of health care.
To learn more about how we can help reduce your organization’s health care expenses, please reach out to an employee benefits advisor.
