Managing Rising Health Insurance Costs In 2024

As we progress through the calendar year 2024, employers are facing the perennial challenge of managing rising health care costs. Providing comprehensive health benefits is crucial for attracting and retaining top talent, but the soaring costs of medical care post a significant financial burden for businesses of all sizes. To strike a balance between employee satisfaction and fiscal responsibility, benefit consultants must work with their clients exploring innovative strategies to control health care expenses while continuing to support the health and well-being of their workforce.

Understanding the Factors Behind Rising Health Care Costs

The escalating cost of health care has been a pervasive issue for employers across the country. As business owners strive to provide comprehensive health benefits to their employees, the rising expenses have become a significant financial burden. For their brokers and benefit consultants, understanding the factors behind the ever-increasing health care costs is essential if they are to help employers implement effective strategies to manage these costs without compromising the well-being of their workforce. Before delving into potential solutions, let’s look at some of the factors contributing to the escalating health care costs. Some key elements include:

• Medical Inflation – One of the primary drivers of rising health care costs is medical inflation. The cost of medical services, treatments, and prescription drugs consistently outpaces general inflation rates. Factors such as the increased demand for health care services, rising wages for medical professionals, and the expense of advanced medical technologies all contribute to medical inflation. Employers must grapple with these inflated costs when designing their health benefit packages for employees.
• Advancement in Medical Technologies – While advancements in medical technology have significantly improved patient outcomes and treatment options, they often come with a hefty price tag. Cutting-edge medical devices, diagnostic tools, and innovative treatment methods can be costly to implement, increasing the overall cost of health care for employers.
• Aging Workforce and Chronic Diseases – As the workforce ages, the prevalence of chronic health conditions increases. Chronic diseases, such as diabetes, heart disease, and obesity, require ongoing medical management and treatment, resulting in higher health care utilization and expenses. The need for long-term care and specialized medical services for an aging workforce adds to the financial burden on employers and abuse.
• Prescription Drug Costs – Pharmaceutical expenses constitute a significant portion of overall health care costs. The prices of prescription drugs continue to rise, especially for specialized medications and brand-name drugs. Employers face the challenge of providing adequate coverage for necessary medications while managing these escalating drug costs.
• Administrative Expenses – Navigating the complex health care system involves significant administrative costs for employers. Managing health insurance plans, complying with various regulations, and administering employee benefits require additional resources, adding to the overall cost of providing health care benefits.
• Unhealthy Lifestyles and Preventable Care – Unhealthy lifestyle choices and the lack of preventive care can result in higher health care costs. When employees do not prioritize preventive measures, it often leads to the development of more severe health conditions, requiring more extensive and expensive treatments. Employers can combat this issue through promoting wellness programs and encouraging employees to take advantage of preventive care services.
• Lack of Transparent Pricing – In many health care systems, the lack of transparent pricing makes it challenging for employers to negotiate fair rates with health care providers. The opacity in pricing can lead to unexpected and inflated medical bills, further increasing the financial strain on employers and their employees.
• Market Consolidation – The consolidation of health care providers and insurance companies can lead to reduced competition, giving these entities greater leverage in negotiating higher prices for their services. This market consolidation can result in employers having fewer options and less bargaining power when selecting health care plans for their employees.

The factors behind rising health care costs for employers are multifaceted and interconnected, with all of them contributing in some way to the challenges employers face in managing health care expenses. To address these rising costs, benefit brokers can work with employers to adopt data-driven strategies, exploring cost-effective health care solutions, promoting wellness and preventive care, and advocating for transparent and fair pricing. By understanding these factors and implementing effective measures, brokers can enable employers to strike a balance between providing quality health benefits to their employees while still managing the financial implications of rising health care costs. Prioritizing employee health and well-being while ensuring sustainable business practices will lead to a more engaged and productive workforce and contribute to long-term organizational success.

On the following pages, we have chosen a few examples of effective strategies that brokers may want to consider when working with their clients to control employee health care costs heading into open enrollment at the end of this year. Specific strategies should be chosen based on individual group size, demographics, and unique company characteristics.

 

Empowering Employees to Make Better Health Care Decisions

Employees have traditionally enjoyed utilizing health care benefits without regard to cost nor any incentive to negotiate for the services provided. In effect, the lack of an employee’s health care literacy has allowed them to make poor choices (not knowing when their medical issue requires use of an emergency room, for instance) or the impact that poor lifestyle choices have on their overall health. Lower health care literacy impacts both the employee and employer as it increases the risk of unnecessary claim costs and more substantial expenses because of poor health outcomes.

Empowering employees to make better health care decisions is a strategic approach that has the potential to significantly reduce health care costs for both employees and employers. By providing employees with the information, tools, and resources they need to become active participants in their own health care choices, employers can help employees foster a sense of ownership over their health. By doing so, organizations can assist in driving positive outcomes that extend beyond the realm of wellness and impact their bottom line.

When employees are educated about preventive care and wellness practices, they are more likely to adopt healthier behaviors. This emphasis on prevention can lead to early detection of health issues and the implementation of timely interventions. By catching potential problems in their early stages, the need for expensive treatments, hospitalizations and invasive procedures can be reduced. This not only improves health outcomes for employees but also prevents the escalation of medical expenses for both the individual and the employer.

The benefits of informed decision-making extend into areas beyond preventive care. By providing access to information about treatments, procedures, and providers, employees can evaluate different choices based on their efficacy and cost-effectiveness. This can lead to a reduction in unnecessary medical tests, treatments, and consultations, which in turn lowers overall health care expenditures. Additionally, employees who understand their insurance coverage and benefits are better positioned to utilize in-network providers, avoiding the higher out-of-pocket costs associated with out-of-network care.

Additional benefits coming from employee empowerment can be obtained in other areas as well. For instance, with pharmaceuticals, educating employees about the benefits of generic medications and providing resources to compare drug prices can lead to smarter decisions at the pharmacy counter. Telemedicine and digital health platforms can help employees gain access to medical advice and consultations remotely, reducing the need for more costly in-person visits.

Finally, a review of utilization data or at the very least, demographic information, can be used to target care-oriented communications more effectively. By identifying high-risk populations, employers can provide supportive resources and provide insight into areas where incentive programs can provide motivation for employees and their families to live a healthier lifestyle. These initiatives will not only help to promote wellness and longevity for the employee, but also return benefits to the employer through increased productivity and lower premiums over the long term. Through just a small reduction in the hospital admissions rate, for instance, employers can save a significant amount of money in premiums.

Benefit consultants can work with their clients to assure them that by empowering individuals to make their own health care choices and providing incentives to do so, they can more effectively maintain quality health care for their employees at a lower overall cost.