Rising Healthcare Costs: How to Support Employees

Recent analysis from Mercer, Aon, and Willis Towers Watson estimates that employer healthcare costs will vault from 5.4 percent last year to 8.5 percent in 2024. Interestingly, in addition to medical inflation and higher utilization of gene therapies, there is mounting demand for costly weight-loss drugs – accounting for one full percentage point of that 8.5 percent increase.

On the other side of the coin, higher healthcare costs and unexpected medical bills represent the top financial concerns of Americans, according to a recent KFF poll. Even a large share of workers who enjoy employer-sponsored insurance (ESI) struggle to afford their monthly premiums and out-of-pocket costs. In fact, the KFF poll indicated that one of the main issues voters want to hear about in this election year is healthcare affordability.

ESI Plan Design

One strategy employers have successfully deployed to contain healthcare expenses is the high-deductible health plan (HDHP). While these plans help employers shift more of the financial burden to workers, it means that plan members are now on the hook for thousands of dollars before their insurance coverage begins. As a result, many employees opt to forgo medical care because they cannot afford to pay out-of-pocket. Furthermore, a survey by the Physicians Advocacy Institute found that doctors are increasingly having to moderate their recommendations due to health plan coverage discussions with patients.

This puts Americans in a pickle wherein medical treatment adjusts to meet plan coverage, rather than vice versa.

According to a study published by the journal of the American College of Rheumatology, about half of the US population suffers from a chronic condition, and 86 percent of healthcare costs are associated with chronic disease. Therefore, it behooves employers to engineer health plan benefits designed to prevent and cost-effectively manage chronic conditions. After all, the worse the condition, the higher the cost.

In addition to negotiating broader provider networks, plan sponsors also are working to find less expensive hospital options for specific procedures. This way they can tier facilities to drive plan members toward less expensive options.

Preventive Care

The main attraction to adding more preventive care benefits to employer plan designs is that they are very popular among members. Most people recognize that the cheapest way to manage healthcare is to not get sick, so taking advantage of preventive care options (e.g., check-ups, onsite clinics, free vaccinations, health fairs, wellness benefits, exercise and nutrition discount programs) is a way to kill two birds with one stone.

A recent survey by Arizent revealed that nearly 80 percent of employers use preventive care benefits to incentivize members. For example:

• 39% host vaccination sessions at the office
• 32% host educational talks or webinars about preventive care
• 31% host disease screenings
• 28% provide monetary incentives
• 26% offer PTO specifically for primary care appointments

Additionally, 21 percent of employers that incentivize preventive care indicated that workforce  health had improved in recent years – illustrating just how vital preventive care can be with ESI.

Additional Employer Support Policies

Mental health benefits continue to be a priority among workers, particularly for Gen Z and Millennials. It is important for company leaders to drive awareness and champion mental health by normalizing open dialogues and promoting benefits. With Baby Boomers phasing out of the workforce, it is more important than ever to practice preventive care – for both mental and physical health – as these younger generations reshape the workforce.

The following are other ways employers can help workers contain healthcare expenses:

• Offer telehealth plan options in lieu of more time-consuming office visits
• Provide healthcare navigation tools to help understand jargon-laden clinical information, simplify the labyrinth of insurance coverage and billing, facilitate care coordination, and enhance health literacy
• Offer popular wellness benefits such as gym access or reimbursements, wellness programs, and nutrition support
• Offer an educational program on how nutrition and gut health impacts mental health and resilience
• Position primary care providers as the quarterback for care screening, referrals and coordination with other specialists across the healthcare continuum
• Be aware of and actively protect workers against feeling isolated as hybrid and work-from-home schedules persist. According to EY, nearly a third of workers say they feel a greater sense of belonging when colleagues regularly check in with them.
• Deploy new programs every year so that workers continue down a path of preventive and proactive healthcare by consuming new information, training, and wellness benefits

Despite the projection for higher healthcare costs this year, many employers are finding it more difficult to pass on these expenses to workers given today’s high inflation, high housing costs, high tuition, and high interest rates on debt and loans. According to a survey by Mercer, two out of three employers report they do not plan to shift additional cost increases to their workforce this year.

After all, it is hard enough keeping up with the cost of healthcare expenses now. Taking on a higher burden would increase financial stress on workers, which could further exacerbate their mental and physical health.

The Loop Archives