5 Opportunities to Counter Predicted Increase of Employer Benefits Costs

The problem with rising employer benefits costs

The persistent challenge of managing rising employer benefits costs continues to demand the attention of business leaders across various sectors. Recent data reveals an alarming trend in the escalation of premiums for employer-sponsored health coverage. According to a survey conducted by KFF and published in Health Affairs, the average annual premium for both single and family health insurance coverage surged by 7% in 2023.

Predictions for 2024 are estimated to jump anywhere between 5.4% (KFF) to 8.5% (Mercer, Willis Towers Watson) due to medical inflation, soaring demand for costly weight-loss drugs and wider availability of high-priced gene therapies. Furthermore, the intricate link between payers and providers in the bid cycles has been highlighted as a critical factor in passing on rate increases to employers.

Despite the challenging landscape, employers are actively considering strategies to control benefits costs while minimizing the impact on their workforce. Mercer’s survey indicated that a substantial proportion of employers are reluctant to pass on the full extent of cost increases to their staff, in recognition of the delicate balance between cost management and talent retention.  No longer is passively managed health care acceptable where relinquishing 100% control to a carrier is clearly leading to increased premiums and reduced benefits.

Opportunities to manage employer benefit costs

While there is no “silver bullet,” a combination of measures could help employers defray cost increases in the near term as well as put the system on a more sustainable long-term trajectory:

  • Reimagine medical networks: Explore the benefits of high-performance, narrow provider networks that can significantly reduce costs without compromising the efficiency and quality of care.
  • Implement consumer-centric solutions: Consider incorporating open transparent network to enhance visibility into cost variation, thus empowering employees to make informed healthcare decisions.
  • Effectively manage specialty drug expenses: Collaborate with pharmacy benefits managers and payers to redefine formularies, considering a balance between brands, generics, and biosimilars. Additionally, explore programs and innovative solutions to achieve long-term cost savings.
  • Engage in high ROI direct primary care solution: Contract with a direct primary care or value based primary care to bypass traditional fee-for-service insurance billing.  A monthly fee per employee and/or dependents covers a comprehensive set of health services without 3rd party interferences dictating course of care, thus resulting in a more personalized, accessible, and coordinated care.
  • Consider an actively managed employer-built healthcare program: Change to a solution that replaces the current passively managed insurer-built healthcare system with a proactive and highly customized solution. This transformative, employer-built approach aims to deliver superior benefits at reduced costs, prioritizing the evolving needs of both employers and employees, ultimately improving clinical and financial outcomes. This approach involves the employer actively managing various aspects of the healthcare plan, including designing benefit packages, selecting healthcare providers, and implementing cost-control measures.

Resources to manage employer benefits costs

We encourage you to explore resources such as Mitigate Partners and Health Rosetta (video here) which can offer comprehensive insights and guidance into implementing these transformative strategies. By proactively adopting innovative solutions, you can effectively navigate the challenges posed by the escalating costs of healthcare benefits, fostering a more sustainable and employee-friendly work environment.

Where to turn for HR Solutions

Houston business owners and executives come to Achilles Group to build a solid HR firewall and to equip their leadership teams with the philosophies, principles and disciplines they need to be effective and profitable. If you are not already a part of the Achilles Group family of clients and want to find out how we can help you, contact us at:

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