Introduction
Employer healthcare cost trends are on everyone’s mind these days. Here’s a quick look at what you need to know:
- Rising Costs: Expect healthcare costs to increase by 6-7% in 2024.
- Primary Drivers: Mental health, high pharmacy costs, and cancer treatment are major contributors.
- Inflation Impact: Persistent inflation and wage increases are driving up costs.
- Workforce Shortages: Clinical staff shortages are pushing hospitals to seek higher rates from insurers.
In today’s economic climate, inflation and economic uncertainty are putting unprecedented pressure on healthcare costs. The employer healthcare cost trends reflect a complex landscape where costs are rising faster year over year. As you navigate through 2024, being aware of these trends can help you make informed decisions for your business.
Rising Pharmacy Costs
One of the major drivers of rising employer healthcare cost trends is the increasing cost of medications, particularly high-cost specialty drugs. These medications, while often life-saving, come with hefty price tags that significantly impact overall healthcare expenses.
High-Cost Specialty Medications
Specialty medications are designed to treat complex, chronic conditions like cancer, rheumatoid arthritis, and multiple sclerosis. These drugs are often biologics, which are more expensive to produce than traditional medications. As a result, they contribute disproportionately to rising healthcare costs. According to Aon, these costs are a key factor in the projected 8.5% increase in healthcare expenses for 2024.
PBM Pricing Transparency
Pharmacy Benefit Managers (PBMs) play a crucial role in managing prescription drug benefits for health plans. However, a lack of transparency in PBM pricing and contracting has been a significant issue. Employers are increasingly demanding detailed reports, auditing PBM services, and requiring compensation and pricing disclosures to combat this. By negotiating contract terms more effectively, they aim to control costs better.
Step Therapy
Step therapy is another strategy employed to manage rising drug costs. This approach requires patients to try less expensive medications before “stepping up” to more costly treatments if necessary. Step therapy can help ensure that the most cost-effective treatments are used first, potentially saving significant amounts for both employers and employees.
Sites of Care Management
Where a patient receives their medication can also impact costs. Administering drugs in a hospital setting is often more expensive than doing so in a clinic or at home. Employers are increasingly focusing on sites of care management to direct patients to less costly settings without compromising the quality of care.
By addressing these key areas, employers can take proactive steps to manage and potentially reduce the rising costs associated with specialty medications. Up next, we’ll look at another significant factor: the increasing costs of cancer treatment.
Increasing Cancer Treatment Costs
Cancer treatment costs are a significant factor in the rise of employer healthcare expenses. Several elements contribute to this trend, including the prevalence of late-stage cancers, disruptions in preventive screenings, and the necessity for specialized care.
Late-Stage Cancers and Preventive Screenings
The increase in late-stage cancer diagnoses is notable, particularly as regular preventive screenings were disrupted during the COVID-19 pandemic. Employers are emphasizing advanced screening measures to detect cancer early, which can help manage long-term costs by treating diseases when they are more manageable.
Cancer-Focused Centers of Excellence
To address rising costs and enhance care quality, many employers are adopting a cancer-focused centers of excellence approach. These specialized centers provide high-quality care and advanced treatments, often at a lower overall cost. In 2024, a significant number of employers plan to offer or consider this strategy.
Oncology Clinical Advancements
New treatments in oncology, such as biomarker testing and immunotherapies, offer promising options but come with high costs. Employers are monitoring these advancements to direct employees towards the most effective and efficient care, aiming to improve patient outcomes while managing costs.
By tackling these issues, employers can better manage the increasing costs associated with cancer treatment while ensuring employees receive optimal care.
Mental Health Challenges
The lingering effects of the COVID-19 pandemic have significantly impacted mental health, with a notable rise in depression, anxiety, and substance use disorders among employees.
Mental health support services have become more crucial than ever. Employers are expanding access to these services to meet the increased demand. This includes enhancing options for mental health support, reducing cost barriers, and launching anti-stigma campaigns.
Flexible working arrangements are also crucial. Allowing employees to work from home or adjust their hours facilitates discreet access to mental healthcare during the day, which is vital for effective management of mental health.
Employers are also emphasizing manager and employee training to recognize and address mental health issues early, which can significantly improve outcomes.
Addressing mental health challenges is essential for enhancing employee well-being and managing healthcare costs effectively.
Innovative Healthcare Delivery
Innovative healthcare delivery methods are changing how employees receive care. Let’s explore on-site clinics, near-site clinics, virtual care, primary care, and preventive healthcare.
On-site Clinics
On-site clinics are medical facilities located within the workplace. They offer convenient access to healthcare services, reducing the need for employees to leave work for medical appointments. According to a survey by the Business Group on Health, about 53% of employers provided on-site clinics in 2023 and plan to do so in 2024.
Near-site Clinics
Near-site clinics are similar to on-site clinics but are located near the workplace rather than within it. These clinics offer the same convenience and accessibility but can serve multiple employers in a specific area. This is particularly useful for companies with smaller workforces or those in hybrid or remote work environments.
Virtual Care
Virtual care has become a critical component of healthcare delivery, especially during the pandemic. Although fewer employers in 2023 (64%) believe virtual care will significantly impact healthcare delivery compared to 2021 (85%), it remains a high priority. Employers are expanding virtual health opportunities and evaluating partnerships with vendors that integrate various services.
Primary Care
Primary care is the foundation of effective health management. Employers are focusing on improving access to primary care to ensure employees receive timely and appropriate medical attention. This focus includes both physical and virtual primary care options, making it easier for employees to get the care they need.
Preventive Healthcare
Preventive healthcare aims to detect and address health issues before they become serious. Employers are prioritizing preventive measures to improve employee health outcomes and reduce long-term healthcare costs. This includes regular health screenings, vaccinations, and wellness programs.
By embracing these innovative healthcare delivery methods, employers can provide better healthcare access, improve employee well-being, and manage costs more effectively. Next, we’ll explore strategies employers are using to manage these rising healthcare costs.
Employer Strategies to Manage Costs
Employers are adopting various strategies to manage rising healthcare costs effectively. Let’s explore some of these key strategies.
Benefits Education
Educating employees about their health benefits is crucial. When employees understand what their benefits cover, they can make better decisions about their healthcare. This can lead to cost savings for both the employee and the employer.
- Clear Communication: Provide simple, clear information about what is covered under the health plan.
- Workshops and Webinars: Offer regular sessions to explain benefits and how to use them.
- Printed Materials and Online Resources: Ensure employees have access to guides and FAQs about their health benefits.
Employee Communication
Effective communication between employers and employees can significantly impact healthcare cost management.
- Regular Updates: Keep employees informed about any changes in their health plans or new benefits.
- Feedback Channels: Create open channels for employees to ask questions and provide feedback about their healthcare benefits.
- Personalized Communication: Tailor communications to address the specific needs and concerns of different employee groups.
Cost Containment
Employers are implementing cost containment measures to manage the financial burden of healthcare.
- Negotiating with Providers: Employers can negotiate better rates with healthcare providers and pharmacies.
- Utilizing PBMs: Partner with pharmacy benefits managers (PBMs) to control prescription drug costs through transparent pricing and contracting.
- Plan Design Changes: Introduce plan design modifications like prior authorization and step therapy to manage the costs of high-priced medications and treatments.
High-Quality Care
Focusing on high-quality care can lead to better health outcomes and lower costs in the long run.
- Centers of Excellence: Direct employees to high-quality care providers, such as cancer-focused centers of excellence, which can provide specialized and effective treatments.
- Advanced Screenings: Encourage preventive screenings and advanced diagnostics to catch health issues early.
Healthcare Navigation Services
Providing healthcare navigation services helps employees find the right care at the right time, which can reduce unnecessary costs.
- Healthcare Navigators: Employ healthcare navigators who can guide employees through the healthcare system, helping them find appropriate care and understand their benefits.
- Digital Tools: Offer digital tools and apps that help employees locate high-quality providers, schedule appointments, and manage their health records.
By implementing these strategies, employers can manage rising healthcare costs while ensuring their employees receive the care they need. Next, we’ll answer some frequently asked questions about employer healthcare cost trends.
Frequently Asked Questions about Employer Healthcare Cost Trends
What is the trend in healthcare costs?
Healthcare costs have been rising steadily for years. Per capita health spending in the U.S. has increased significantly over the past few decades. For instance, the average per worker cost of employer-sponsored health insurance rose by 5.2% in 2023, reaching over $15,700 .
When adjusted for inflation, using constant 2022 dollars, the increase remains substantial. This trend is driven by several factors, including inflation, higher wages for healthcare workers, and increased costs for medical supplies.
What are some employer-sponsored health insurance trends?
Employer-sponsored health insurance is evolving in response to rising costs and changing healthcare needs. Here are a few key trends:
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Per-Employee Cost Increase: Costs are rising faster than in previous years. Aon projects an 8.5% increase in 2024, with average costs exceeding $15,000 per employee .
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Multi-Year Contracts: Many employers have multi-year contracts with insurers, which can delay the impact of inflation but eventually lead to higher costs as contracts are renegotiated.
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Inflation-Driven Cost Increases: Healthcare providers are pushing for larger cost increases to cover higher wages and supply costs incurred during recent years (source).
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Prescription Drug Costs: These are a significant driver of cost increases, with spending rising 8.4% in 2023 due to new high-cost drugs .
Why is employer health insurance so expensive?
Several factors contribute to the high cost of employer health insurance:
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Administrative Overhead: This includes costs for managing health plans, processing claims, and ensuring compliance with regulations.
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Marketing and Underwriting: Insurers spend a lot on marketing their plans and underwriting, which involves assessing the risk of insuring different groups.
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Claims Processing: The process of handling and paying out claims is complex and costly, adding to overall expenses.
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High-Cost Treatments and Drugs: The rising cost of specialty medications and advanced treatments, such as those for cancer and chronic diseases, also drive up costs.
Employers can manage these expenses by exploring innovative healthcare delivery methods and implementing cost-saving strategies. By staying informed about employer healthcare cost trends, they can better navigate the challenges and provide valuable benefits to their employees.
Conclusion
As we navigate the evolving landscape of employer healthcare costs, staying informed about trends is crucial. At NPA Benefits, we are committed to helping businesses manage these challenges through flexible health insurance options.
Our goal is to provide cost-saving solutions that put you in control. By offering comprehensive health insurance benefits, you can ensure your employees’ well-being while also managing expenses effectively.
Flexible health insurance options are key to adapting to the rising costs of healthcare. Whether it’s through traditional plans, self-funded insurance, or innovative approaches like level-funded health insurance, we have the expertise to guide you.
By choosing NPA Benefits, you invest in the health and success of your employees and your business. Learn more about our health insurance benefits and how we can help you stay ahead of the trends.
For more information on how we can assist you, visit our health insurance benefits page.
Together, we can navigate the future of employer healthcare costs and ensure a healthier, more secure future for your workforce.
