5 Ways Employers Can Help Their People Manage Rising Healthcare Costs
Healthcare affordability is one of the greatest concerns facing Americans across incomes and demographics. An estimated 112 million Americans struggle to pay for health insurance. Additionally, according to the 2022 Kaiser Family Foundation Healthcare report, about one-third of Americans worry about affording their monthly premiums and 44% worry about paying their deductible before health insurance kicks in. These costs are having an outsized impact on individuals delaying necessary healthcare.
Many Americans with health insurance rely on their employers for coverage - 60% of individuals under the age of 65 depend on company-sponsored insurance. In the last decade, employer-sponsored health insurance premiums have risen above inflation rates and wage growth. Annual individual coverage premiums rose from an average of $5,049 in 2010 to $7,911 in 2022, a 58% increase. Family coverage premiums also rose from $13,770 to $22,463 over the same period, an increase of over 63%.
Factors driving up the cost of healthcare
A report by PWC on medical cost trends identified several factors that have driven up healthcare costs in recent years.
- Fallout from the pandemic: Health-related issues requiring care were largely deferred during the height of the pandemic. Now, there’s increased demand for healthcare, particularly mental health services.
- Rising cost of drugs: Increased costs of prescription drugs translates to higher overall healthcare costs.
- Technology in healthcare: Technological advancements, stemming in part from the rise in adoption of telehealth services, have improved healthcare in many ways, but adopting such technology also means higher upfront costs for consumers.
How employers can manage rising healthcare costs
Employers can help make healthcare more affordable for their employees by adopting some of these key measures:
Offering High Deductible Health Plans
A High Deductible Health Plan (HDHP) has lower premiums and higher deductibles than a traditional health plan. Typically, HDHPs are paired with a health savings account (HSA), which allows employees to set aside money on a pre-tax basis to pay for qualified medical expenses and unused funds roll over from year to year. Generally, if you’re in good health, rarely need prescription drugs, and don’t expect to incur significant medical expenses during the plan year, a HDHP might be a good way to keep health insurance expenses down.
Providing Flexible Spending Accounts (FSA)
FSAs allow employees to put aside pre-tax money to pay out-of-pocket medical expenses, such as payments for drug prescriptions, medical or dental office visit copays, eye exams, and vaccinations. FSAs might be useful for employees with predictable medical expenses.
Including Telehealth Options
Telehealth allows employees to receive medical care remotely. Patients can have consultations with doctors, get their prescriptions refilled, or attend mental health therapy sessions via videoconferencing, phone calls, and online messaging platforms. Telehealth increases access to healthcare and can lower the cost of care by diverting patients away from costly emergency room visits and enabling employees to treat health problems sooner.
Providing Low or No-Cost Premiums
More employers are opting to pay the full cost of employee premiums. According to Mercer’s Health & Benefits Strategies for 2023 report, 11% of employers will provide free employee-only coverage and another 11% are considering it this year. If this is not an option for you, discuss other alternatives with your benefits broker. They may be able to find more affordable health plans and/or negotiate rates with insurance companies in their network.
Implementing Financial Wellness Programs
A comprehensive financial wellness program can help employees determine the financial impact of various health insurance options and choose a plan that’s most suited to their specific needs. A financial wellness program distills complex financial, tax and insurance considerations and provides employees with the knowledge and skills to confidently select and utilize the benefits that are right for their situation. Plus, fiduciary professionals can advise employees on their healthcare options and how to optimize employer-provided benefits.
Healthcare remains one of the most desirable employee benefits. For it not to become a significant financial burden on both employers and employees, companies need to take key steps to ensure that healthcare remains affordable.