‘Time for employers to take action’ on soaring healthcare costs

A pandemic, the Great Resignation and a massive shift to remote work, among other things, have given employers plenty of competing priorities.

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But the biggest focus for the short-term is clear: controlling healthcare costs.

That’s according to a new employer survey out Tuesday from consulting firm Willis Towers Watson, which finds that nearly all U.S. employers (94%) say managing healthcare benefit costs will be their top priority over the next two years.

“There are many pressures on HR and benefits leaders, and there is risk in not getting out ahead of the rising cost of healthcare quickly,” says Lindsay Hunter, senior director, health and benefits, Willis Towers Watson. “In a time when skilled talent is moving organizations at a rapid pace, managing benefit cost for both the employer and their employees is paramount.”

The findings come as inflation, which is rising at record rates, and a number of other factors—from deferred care, missed preventive care and late diagnoses because of the pandemic to health system consolidation, COVID-19 infections and long-haul COVID—are driving up healthcare costs.

Related: Do you have a long-haul COVID strategy?

“Going forward, something to watch out for is that many COVID-related costs, such as vaccines and some treatments, have been covered by the federal government,” Hunter says. “As these costs start to be placed on the shoulders of employers, we can expect healthcare trends to be impacted.”

Keeping a lid on soaring healthcare costs presents an extra level of difficulty for organizations as the Great Resignation is in full swing.

Historically, employers often looked to cost shift to employees as a way to manage increasing healthcare costs. But with a tight labor market and a heightened focus on retaining and attracting talent, that approach isn’t sustainable, Hunter says.

Plus, she says, employers that are better able to manage costs can “deploy the savings into other investments, including recruitment and retention needs.”

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According to Willis Towers Watson’s survey of 636 U.S. employers—which collectively employ 10 million workers—nearly two-thirds of employers (64%) say they will take steps to address employee healthcare affordability over the next two years. These approaches include improving quality and outcomes to lower overall cost (55%) as well as adding or enhancing low- or no-cost coverage for certain benefits (41%). Additionally, over the next two years, nearly one-third (32%) of employers expect to make changes to their employees’ out-of-pocket costs, while 21% expect to make changes to their health plan payroll contributions.

Further embracing virtual care also is on the table. The survey finds that by the end of 2023, most employers (95%) expect to offer virtual care for medical and behavioral health issues, and 61% expect to offer lower cost-sharing for virtual care. Just over half (55%) think the expansion of virtual care will help decrease costs in the long run, and 50% think it will improve outcomes.

Hunter adds that other effective ways to manage longer-term costs include reviewing vendor partners for the best financial terms (including provider discounts, contract terms, and overall cost of care); exploring high performing or alternative network options in key geographies; implementing additional culture of health initiatives through care management and/or wellbeing programs and managing high-cost conditions through centers of excellence or targeted vendor partners.

Related: Can ICHRAs help control the cost of health plans?

“It’s time for employers to take action,” she says. “Ultimately, a multi-faceted approach utilizing several tactics is the best way to manage cost effectively.”

Kathryn Mayer
Kathryn Mayer is HRE’s benefits editor and chair of the Health & Benefits Leadership Conference. She has covered benefits for the better part of a decade, and her stories have won multiple awards, including a Jesse H. Neal Award and honors from the American Society of Business Publication Editors and the National Federation of Press Women. She holds bachelor’s and master’s degrees from the University of Denver. She can be reached at kmayer@lrp.com.

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