Chronic health conditions, devastating health insurance claims and soaring prescription drug prices will cause healthcare costs to rise significantly next year, employers say.
U.S. employers expect a median increase in health care costs of 7% in 2024, according to a report. New data from the International Foundation of Employee Benefit Plans (IFEBP) is a nonpartisan group with over 31,000 members. For the second year in a row, employers expect a 7% hike.
IFEBP’s vice president of content, Julie Stitch, said a survey of 171 employers conducted by the foundation in early August and released this week showed that while the numbers weren’t all that surprising, inflation continued to rise. He said it was important information that showed that it was having an impact.
“This is in line with what we expected,” she said.
“What we are seeing is certainly the impact of inflation overall and the impact of inflation on some of the health care trends, the supply of goods and services, labor shortages, costs, material and staff shortages. What kind of impact are they having, and how is that impacting ‘providers,’ Stitch explained. “And that cost is passed on to employers.”
Growth projections for 2024 are in line with employers’ forecasts for 2023 last year, but higher for 2021 and 2022 than employers’ projections for 2021 and 2022. COVID-19 Pandemic. During this two-year period, employers expected his annual costs to rise by 4% to 5%.
What is driving rising healthcare costs?
The top reason employers identified as contributing to rising health plan costs in 2024 was utilization due to chronic health conditions, cited by 22% of respondents, with 19 narrowly devastating claims. followed by %.
These trends are partly due to many employees skipping or postponing tests such as mammograms and colonoscopies during the pandemic, followed by more dramatic diagnoses later on. That could be the reason, Mr. Stich said.
“Someone could have delayed screening and discovered a cancer diagnosis that could have probably been discovered earlier,” she explained. “And it can end up being chronic or persistent, or even catastrophic damage claims.”
The most cited reasons for predicting rising health care costs are the cost of specialized and expensive prescription drugs, cell and gene therapies (16%) and health care providers (14%).
Continued results of health checkups that did not receive cancer or other diagnoses during the pandemic may have contributed to higher healthcare costs, but more employees will receive healthcare in 2023 The use of such tests is projected to decline in 2024 as Only 4% of employers said the main reason for the increase in costs was increased utilization due to delays in preventative and elective care during the pandemic. That’s down from 12% last year.
Will the costs be passed on to employees?
Will employers pass higher costs onto their employees? Some may, but that’s probably not the main strategy. Only 16% of employers said they had plans to share the cost with their employees by increasing deductibles, coinsurance, copayments and premium contributions. This is down from the 22% of employers who said they would pass on costs last year.
The findings are also consistent A study published by Mercer earlier this yearWe found that 45 percent of employers said they were not willing to pass higher costs on to their employees.
This may be because the labor market remains tight and employers want to offer competitive and affordable benefits to attract and retain workers.
“This speaks to the impact of benefits on both attractiveness and retention,” Stitch said. “Employers are probably anticipating, ‘If we pay our employees more, will that put us out of step with our industry and the efforts of our competitors for local talent?’ They don’t want to sacrifice themselves and get out of the business. “
Instead, the main strategies employed by employers for IFEBPs to manage rising healthcare costs are administrative initiatives such as requiring pre-approval, employing disease management, and adding advice lines to nurses. (cited by 22 percent of respondents).
Other cost containment strategies included work and health programs (13%). Plan design efforts such as conducting dependent eligibility audits, providing highly deductible health insurance, and requiring spousal surcharges and carve-outs (12%). Purchasing/provider initiatives such as telemedicine, price transparency tools, and providing centers of excellence for employees (12%).
Stitch recommended that HR and benefits leaders think strategically about their benefit packages and assess whether the benefits they offer resonate with their employees.
“They should look at usage,” she says. “It’s really up to them to look at the whole package and see what they’re paying for and see if they’re getting the most value for the benefits they’re spending.”
