American businesses are seeing the fastest increase in health care costs in decades, and the cost of private health insurance is expected to rise as well. 7.6 percent This year alone, double-digit increases are expected through 2025. These increases will have an even bigger impact on budgets given that businesses continue to grapple with macroeconomic pressures and increased demand for supplemental health care services in an already complex labor market.
Companies often shoulder rising healthcare costs to avoid passing the costs on to employees in the form of higher insurance premiums. This has traditionally been considered a fair financial trade-off, as access to healthcare benefits is believed to maintain a healthier, more productive workforce. But there are limits, and executives are increasingly concerned about whether spending on traditional health insurance products translates into better outcomes for employees. Healthcare fragmentation and rising out-of-pocket costs often force employees to delay or forgo treatment and services.
Addressing disparities in healthcare costs and quality requires stronger executive involvement. Historically, it has been the role of financial officers to oversee health insurance costs as a common practice in P&L management. But with healthcare costs showing no signs of abating, a more strategic focus on cost containment is needed.
Prioritize values
When it comes to healthcare costs, businesses don’t have to accept the status quo. Thankfully, research shows that this is slowly starting to change.
a Recent Milken Institute Survey We found that 38 percent of 72 large employers currently have value-based care strategies in their employee benefits offerings; in other words, they are ensuring that providers within their insurance network are financially accountable for meeting certain population health metrics and cost benchmarks. Respondents noted that preventive care and primary care are the two most important tenets of these value-based arrangements, both of which have proven effective in improving patient health and reducing overall healthcare costs. And, just as important, these two areas create clear opportunities to measure improvements in population health.
This trend is set to accelerate in the coming years, with one-third of respondents saying they are trying to best understand what value-based strategies will work for them and their insureds. This is a much-needed change, but it will require a more concerted effort to prioritize affordability and quality of care.
Employers can (and should) use their buying power and influence to demand higher levels of value from health care providers.The Milken Institute study also uncovered other significant opportunities to improve the return on health care dollars.
Reduced medical costs
It’s not surprising that reducing health care costs is a key priority for employers, who view it as a holistic issue. Given that high premiums, deductibles and copayments often make health insurance unaffordable for many, there was a particular focus on addressing employee health care costs overall.
Respondents also emphasized the importance of a broad network of providers and service options, reflecting a deep commitment to accessibility. Employers can achieve this goal by building a targeted network of care providers with a proven track record of delivering high-quality, cost-effective care.
Relieving the burden on mental health
The need for mental health services continues to grow across employer-sponsored plans, and its severity is often disproportionate across race, sexual orientation, and income level. Employers clearly recognize this burden, with more than 20% of survey respondents indicating they intend to increase these resources over the next two to three years.
Additionally, 63 percent of respondents provide mental health resources through their employee assistance programs (EAPs), and 36 percent provide caregiver support and resources. In a cost-constrained environment, employers must invest in areas that have the most profound impact on employee well-being, such as mental health.
Business leaders can deploy a variety of tools to address the healthcare cost paradigm. Each plan member requires a unique solution, and no employer can improve healthcare alone. It is incumbent on each of us to focus on value and have honest conversations about opportunities for improvement.
