As we approach 2024, the nation is expected to witness a significant uptick in the costs associated with benefits programs, including health insurance. US employers can expect health benefit costs to rise by 5.4% per employee, according to results from Mercer’s National Survey of Employer-Sponsored Health Plans 2023.
Health benefit cost growth of 5.4% suggests that national inflation, labor shortages, and changes in the economic landscape will all contribute to higher health benefit costs. These costs may impact both employers and employees but can be manageable with the right approach.
Rising employee benefits costs can be attributed to the general changes in the economic landscape. Costs are rising in every industry, from labor and materials to housing and oil. Healthcare has been equally affected by inflation, with costs of medical services continually increasing, and medical equipment costs equally rising. Even the cost of real estate, which is required for medical institutions, can impact the overall cost of healthcare for employers.
There have also been significant medical advancements when it comes to treatments, diagnostic equipment, and medication. Medical institutions have implemented more successful methods of care that in turn come at a higher price point. When the cost of service and equipment increases, these increases are reflected in the general cost of healthcare coverage.
In addition to external impacts, the general population is aging, and more illnesses have been reported. This increased presence of illness and injury has led to more claims filed on healthcare policies, deeming the general risk evaluation higher. As with any insurance coverage, the higher the risk, the higher the cost of premiums. When determining the risk, underwriters must take into consideration the likelihood of a claim, and the potential cost of the claim, both of which are currently inflated.
The increase of 5.4% takes into consideration the changes employers reported they plan to make to balance costs. Without any changes, participants of the survey indicated that costs could rise closer to 6.6%.
Employers have options and steps they can take if they are concerned about the rising costs of healthcare costs. The easiest way to reduce costs is to transfer more financial responsibility to the employee. This is quite common for large corporations, and reducing your contribution can significantly improve the costs of healthcare for a large business. However, this could reduce employee satisfaction or lead to challenges during the hiring process if benefits aren’t up to standard.
Another option is offering multiple tiers of coverage for employees, where a lower tier plan has a fair cost, and those who wish to have better coverage can opt to pay more. This ensures that plan costs for the employer remain stable, but employees still have the option for whatever level of coverage they require.
These options are suitable for small businesses as well, however, typically businesses with less than 50 employees cover a larger portion of the premium. Organizations must take into consideration both the financial well-being of the business and the needs of their employees when determining which should take precedence in these decisions.
In addition to the actual coverage, companies can opt to alter their deductibles when trying to lower costs. Increasing the deductible can have a significant impact on the overall premium price, and for employees who rarely require medical assistance, paying more per visit may be preferable to a higher monthly cost.
Benefits are an important aspect of an employee plan, especially in 2023 where many employees report that benefits are more important than salary. However, if your organization is concerned about costs, it may be a good idea to review your full benefit options and add or remove certain offerings.
Generous PTO packages are a benefit for employees and can be an alternative to higher healthcare coverage. On the other side, reducing PTO packages if your plan pays out unused days can save funds to be allocated toward healthcare coverage.
A wellness stipend is a taxable benefit paid to employees to cover healthy living and wellness-related expenses. Wellness stipends can be an alternative benefit, especially for employees who maintain their wellness and do not often require medical visits. This stipend can ensure they can afford to maintain their health, which could lead to less preference for coverage options.
Telehealth has become a very acceptable method of medical care since the pandemic. Today, even where medical facilities are open, many opt to maintain their wellness visits virtually. Telehealth is an easy and convenient option for employees and can save employers funds due to the lower cost in comparison to in person visits. Adding telehealth services to your medical plan in conjunction with a standard plan can save your organization premium costs.
Rising costs are inevitable, but understanding the driving factors and ways to work around them can ensure your organization maintains a fair cost for employee-sponsored plans. Considering alternative benefits, adjusting deductibles, and balancing your financial well-being with employee satisfaction will all be key considerations for 2024.
In addition, working with a reputable insurance agent can ensure that your business secures the highest quality coverage for the lowest possible price.
Employee benefits coverage through ECBM Insurance offers a comprehensive and tailored solution to meet the unique needs of both employers and employees. With a commitment to providing top-notch insurance options, ECBM ensures that your workforce is well-protected, and your organization remains competitive in attracting and retaining talent. Our range of services encompasses health insurance, retirement plans, disability coverage, and more, all designed to enhance employee well-being and job satisfaction. For further information on our services, please contact one of our agents.