Healthcare Costs Expected to Skyrocket: What HR Needs to Know
by Caroline Boyland August 25, 2022
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Healthcare Costs Expected to Skyrocket Next Year
If it feels like you haven’t been able to catch a financial break lately—you’re not alone. It seems inflation has now taken over as the number one concern across many households.
We’ve seen prices skyrocket across countless industries: food, gas prices, real estate, transportation, and other everyday expenses. And now, because inflation really likes to pull the old “kick ya while you’re down,” healthcare costs are predicted to skyrocket next year—for employees and employers alike.
Mercer's recently published National Survey of Employer-Sponsored Health Plans seeks to provide insight into what we can expect to see across healthcare costs in the coming year. Let’s take a look at some of the key findings, how the newly signed Inflation Reduction Act comes into play, new benefits and healthcare trends, and how employers and employees can drive cost savings.
Growing healthcare costs
TL/DR? Healthcare costs are rising.
In 2023, employers expect an average increase of 5.6% in healthcare costs. This is a significant jump from this year's projection of a 4.4% increase. The main drivers of rising healthcare costs are growing labor costs and supply chain-driven price increases.
When it comes to the cost of prescription drugs, how they will evolve remains to be seen. The Inflation Reduction Act promises to cut drug costs for people covered by federal medical health insurance by allowing direct negotiation between Medicare and pharmaceutical companies. What effect this will have on the prices of drugs covered by private insurance plans has yet to be seen.
Current healthcare trends
As well as facing rising costs, employers must adapt to changing trends in the healthcare industry and new employee concerns.
Here are some of the current areas of focus for employers:
- Behavioral health: as the world starts to get back to some levels of normalcy, employees are struggling with anxiety, stress, and depression at unprecedented levels. The flip-flop-flip of going back and forth between remote work, in person work, and hybrid work in such a short time has taken a toll on employee’s mental health, and employers are beginning to take action. Because of this, we’re starting to see employers focus on promoting mental health in the workplace and offering programs and benefits to support employees' well-being.In the coming years, we can expect to see a rise in the use of behavioral health services as a critical part of employee benefits.
- Reproductive care: in the wake of the Supreme Court's decision to overturn Roe v Wade, many states have been quick to pass laws restricting access to abortion. This has led to a rise in the number of women seeking out reproductive care services, such as abortions and contraception, outside of their home state. Employers have started to take note, and many have committed to ensuring that employees have access to these services regardless of state legislation.
- Digital health: the last few years have forced us to rely on technology more than ever, and that's not likely to change anytime soon. Employers are investing in digital health solutions to help employees manage their health and well-being and provide easier access to care. We can expect to see a rise in the use of telehealth services and preventative care and wellness programs.
- Health equity: nearly half of the employers that Mercer surveyed in companies with 500 or more employees stated that they're very concerned about health equity, and it's easy to see why. The pandemic has disproportionately affected marginalized communities, and employers are beginning to take note of existing healthcare and economic disparities. In the coming years, employers have stated that addressing health equity will be a priority for them.
Healthcare's impact on employee retention
Despite the projection that healthcare costs will continue to escalate, employers are reluctant to reduce employee healthcare benefits.
With all the labor shortages coming from what has been dubbed the Great Resignation, employers are more aware than ever that solid employee benefits are crucial in attracting and retaining talent. This is why they are reluctant to either decrease healthcare benefits coverage or pass part of the costs back onto employees through higher deductibles or copays.
Instead, employers are looking for ways to control costs without reducing benefits—to do more with less, if you will. This includes looking for ways to optimize their investment in employee benefits by enriching their offering to meet the specific needs of their workforce.
Making the right healthcare choices
One of the best ways to control the costs of employee healthcare benefits is to make sure that employers offer the right mix of plans that genuinely meet their employees' needs, and that employers are thoroughly educating and communicating the value of these plans to their employees.
With the myriad of different plans and providers out there, and the complexity of the healthcare system, this can be a daunting task. But there are ways to simplify the process and ensure that employees know their options and feel confident when selecting them.
A benefits decision support tool like Nayya can cross-reference data with an employee’s physical, mental, and financial needs to provide personalized benefits recommendations to each unique employee. With a tool like this, employees receive comprehensive benefits education and support throughout the entire enrollment process.
Cutting costs for employees and employers
One of the biggest benefits (no pun intended) of a benefits decision support tool is the ability to help drive cost savings for employees and also employers.
By choosing the right plans for their family, health, and financial background, employees can feel confident that they are not overpaying for benefits, and that their plans have their back when they need them most. Throughout the process, employees also receive education around pre-tax savings accounts like HSAs, FSAs, and 401K accounts, which gives them the confidence to increase pretax contributions which can help drive healthcare and retirement savings over time.
For employers, Nayya drives cost savings by:
- Making sure employees are on the right plans (whether that be PPOs, HDHPs, or otherwise)
- Driving increased contributions to aforementioned pre-tax savings accounts which can help employers save on Payroll taxes
- Giving time back to HR teams to so that they can do more with less
And so much more.
Benefits are the single most important financial decision employees make for themselves and their families each year—they have a direct impact on health and financial wellness for everyone. With healthcare costs expected to skyrocket next year, and record high inflation rates, a benefits decision support tool can alleviate the pain associated with increased costs for employees and employers alike.
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