The tough labor market continues to plague employers with challenges of finding and retaining employees. A new report from USI Insurance Services, the 2023 Employee Benefits Market Outlook, looks at the strategies to reduce the impacts of health care costs.
Elaborating on other reports USI highlights some statistics that show employers are spending more on compensation and benefits, with wages having increased 22.7% in 2022 for employees who changed jobs and 7.5% for those that stayed.
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Benefits spending also continue to be impacted by increasing health care costs. Employee burnout and staffing shortages in the health care sector resulted in higher wage growth than the rest of the private sector, while higher costs in general drove up the price of medical commodities by 5.5% in 2022.
Health care spending is also being impacted by emerging cell and gene therapies, ranging from $250,000 to $3.5 million per claimant — and the market for these treatments is set to expand significantly within the next few years.
U.S. businesses also spent much of 2022 battling high inflation, rising interest rates and growing recession concerns. Unemployment is forecasted to increase to 4.4% in 2023 as employers work to balance budgets and remain profitable in the year ahead.
Strategies to help employers reduce costs can include:
Managing fixed and variable costs – Understanding the various components that impact the cost of your renewal can give your organization a better starting point for negotiating pricing with the insurance company.
Plan design changes – Changing how a fully insured health plan is funded can help reduce premium costs. For example, switching from a rich PPO plan design to a high-deductible health plan can reduce premium by as much as 30%. Making additional changes, like funding a health reimbursement arrangement (HRA), can help reduce your overall costs while maintaining benefits for employees.
Consider alternative funding – Some organizations may be better suited to an alternatively funded plan, such as level- or self-funded. These types of plans provide savings opportunities by only paying for claims incurred, eliminating carrier profit and premium taxes, allowing for flexible plan design and providing claims data transparency, which allows employers to implement targeted disease-management solutions.
Other issues like outsourcing leave management administration/absence management solutions, considering voluntary benefits, and assessing the high cost of emerging genetic therapies will need to be addressed this year for employers to make significant reductions from the impact of increases in health care costs.
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