You can’t turn on the news or your computer or review your favorite publication without seeing something about health care and skyrocketing prices. National health spending is projected to increase, on average, 5.6% per year between 2016 and 2025. Moreover, it is projected to grow 1.2 percentage points faster than Gross Domestic Product (GDP) per year over the same period. The projected result is a rise from 17.8% in 2015 to 19.9% by 2025. This is very concerning for individuals and employers alike. Some of the factors contributing to the increased costs include:
- Demographics – The workforce segments that are expected to grow the fastest between now and 2024 are ages 65 to 74 and 75+. Approximately 10,000 Baby Boomers in the United States will turn 65 every day until about the year 2030. As we get older, we tend to need more medical care. Older workers tend to experience higher levels of severe injury and chronic illnesses. Older workers also have slower recovery after nonfatal injuries or illnesses and, therefore, have longer delays before returning to work. The most prevalent types of chronic diseases experienced by employees 55 and older are arthritis (47%) and hypertension (44%). Heart conditions, diabetes, psychiatric or emotional problems, and cancer are reported at 10%.
- Increased prescription drug costs – Drug prices continue to rise faster than either wages or the cost of living, with an expected increase of 11.6% in 2017. Specialty drugs are expected to increase approximately 18.7%.
- New medical technology – People view their health as their most valuable asset and want to leverage the latest and greatest innovations in order to prolong and improve their quality of life. Consumers typically only pay a portion of the price (with the insurance carrier picking up the tab for the balance), so they don’t pay attention to the large price tags associated with new tests and treatments available.
- Increased utilization – Defensive medicine, an aging workforce, low-cost plan designs, and unhealthy lifestyles are only a few factors that are contributing to increased utilization.
Employers typically want to continue to offer valuable benefits to their employees as well as use benefits to attract and retain high quality new talent. Following are suggestions that employers can consider to help combat the high increases:
Promoting Employee Health and Wellness – One of the most common buzz words in employee benefits is “wellness”. People are the most important assets for an organization, and helping to encourage wellness can provide a huge ROI with increased productivity, decreased absenteeism, and lower insurance premiums.
Consumer Driven Health Plans - Health Reimbursement Accounts (HRAs) and Health Savings Accounts (HSAs) continue to be a growing trend. These plans designs provide assistance to employees to pay for routine healthcare expenses. The plans usually have higher out-of-pocket costs for members but come with lower monthly premiums. Education is critical in the successful rollout of these plan designs within an organization.
Increased Employee Cost-Sharing – Employers are using several cost-share strategies to help control cost increases. One of the most common tactics is a defined contribution amount which is a set dollar amount (as opposed to a percentage) toward a number of different plan options. The employee then elects which plan best fits their needs and budget based on the amount of monthly premium they would need to contribute. Employers are also raising deductibles and co-payments. Employers need to make sure that plans continue to meet ACA affordability requirements as well as minimum value.
Educate Employees on Cost Saving Tips - With a little bit of preparation and guidance, employees can be proactive with individual heath care expenses. Staying "in-network", knowing which questions to ask, and exploring prescription discounts are just a few steps individuals can take to minimize health care costs.
Download the flyer and share it with your team for ways employees can
also help control health care costs for themselves and the organization.