{"id":15040,"date":"2022-09-08T07:40:04","date_gmt":"2022-09-08T07:40:04","guid":{"rendered":"https:\/\/www.shrm.org\/hr-today\/news\/hr-magazine\/fall2022\/pages\/curbing-rising-health-care-costs.aspx"},"modified":"2022-09-08T07:40:04","modified_gmt":"2022-09-08T07:40:04","slug":"curbing-rising-health-care-costs","status":"publish","type":"post","link":"https:\/\/squarehr.com\/index.php\/2022\/09\/08\/curbing-rising-health-care-costs\/","title":{"rendered":"Curbing Rising Health Care Costs"},"content":{"rendered":"

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Veteran health care journalist and author Marshall Allen tells the story of a 51-year-old man who needed two MRIs of his back. His nurse practitioner referred him to a nearby hospital-affiliated imaging center, where the MRIs would cost a total of $9,000, which he\u2019d have to pay for out of pocket because his health plan deductible was $10,000. <\/p>\n

The man wisely decided to check out the prices from other providers. At an imaging center about half a mile from the first one, the cost was $950 for both MRIs. In other words, \u201cHe got the same tests for more than $8,000 less by shopping around,\u201d Allen says on his website<\/a>. \u201cThat\u2019s about what I paid for my last car\u2014a huge savings.\u201d <\/p>\n

The situation may be surprising, but perhaps it shouldn\u2019t be: The price of an MRI can vary by $300 to $3,000 in the same geographic area, with no demonstrated difference in quality.<\/p>\n

Allen shared this story as an example of potential cost savings that are available. But comparison shopping for nonemergency care is just one of many smart tactics that can reduce health care costs for employers and their employees.<\/p>\n

For business leaders coping with a range of fast-evolving workplace issues, the rising cost of health insurance remains a constant concern. Health care expenses have long outpaced both general inflation and wage increases, and there\u2019s little relief in sight. Consumer prices\u2014rising at the fastest pace in decades\u2014are likely to push health benefits costs still higher this year and next.<\/p>\n

In response, employers are boosting efforts to make benefits more affordable. At the same time, they\u2019re elevating employee awareness of what benefits are offered and how best to access them.<\/p>\n

For example, results released in April from consultancy WTW\u2019s 2022 Emerging Trends in Health Care Survey<\/a> showed that nearly two-thirds of more than 600 U.S. employers (64 percent) intend to take steps to address employee health care affordability over the next two years.<\/p>\n

Most employers will try to avoid passing on increased costs \u201cbecause of the tight labor market and the desire to keep health care affordable for employees,\u201d says Jeff Levin-Scherz, population health leader at WTW. Still, employers\u2019 total rewards budgets are limited, so increased health care spending could cut into funds set aside for other benefits costs\u2014and pay raises.<\/p>\n

That leaves employers with the difficult task of trying to keep their coverage expenses manageable without further straining employees\u2019 financial well-being. To do that, they\u2019ll need to identify and implement smart cost-management strategies.<\/p>\n

Cost Trends Today<\/p>\n

The average per-employee cost of employer-sponsored health insurance rose 6.3 percent in 2021, as employees and their families resumed seeking care after avoiding it during the height of the pandemic, HR consultancy Mercer\u2019s 2021 National Survey of Employer-Sponsored Health Plans<\/em> report found. <\/p>\n

At the end of 2021, employers were projecting, on average, a fairly typical cost increase of 4.4 percent for 2022. The recent inflation spike, however, may upend those expectations.<\/p>\n

Mercer\u2019s chief actuary, Sunit Patel, cautioned that a number of factors could drive increased growth in health care costs as the pandemic wanes. \u201cAt the top of the list of concerns are higher utilization due to \u2018catch-up\u2019 care, claims for long COVID, extremely high-cost genetic and cellular drug therapies,\u201d and the general effect of inflation on health care prices, he says.<\/p>\n

Last year, health benefits cost growth was sharpest among smaller employers. Those with 50 to 499 employees saw a 9.6 percent increase, while larger employers (those with 500 or more employees) reported average cost growth of 5 percent.<\/p>\n

Smaller employers usually offer fully insured health plans, with premium increases reflecting insurance carriers\u2019 expectations of higher costs. Larger employers are more likely to sponsor self-insured plans, in effect acting as their own insurers, with more ability to control costs and plan design.<\/p>\n

Meanwhile, prescription drug costs among large employers rose 7.4 percent last year, driven by an 11.1 percent increase in spending on high-cost specialty drugs.<\/p>\n

\"Screen <\/p>\n

Limits on Cost-Shifting<\/p>\n

When health benefits cost growth accelerates, employers typically ratchet up cost-management efforts to keep increases at sustainable levels. However, one traditional tool\u2014shifting a larger share of the cost of health services to plan enrollees\u2014seems to be off the table for many employers. That\u2019s because they\u2019re mindful of the financial strain many employees are under.<\/p>\n

Nearly half of insured adults say they have difficulty affording out-of-pocket costs and 1 in 4 have difficulty affording their deductible, according to a Kaiser Family Foundation (KFF) report based on a poll<\/a> released late last year.<\/p>\n

Concerns about health care affordability for lower-wage workers, along with the need to retain and attract employees in a tight labor market, have limited or even reversed some health plan cost-shifting trends. For instance, Mercer reported that in 2021: <\/p>\n

Among small employers, the median deductible for individual coverage in a preferred provider organization plan dropped from $1,000 to $900.<\/p>\n

Among large employers, the median individual deductible in a health savings account (HSA)-\u00adeligible high-deductible plan dropped from $2,000 to $1,850.<\/p>\n

According to the KFF report, \u201cHalf of U.S. adults say they put off or skipped some sort of health care or dental care in the past year because of the cost, while 3 in 10 also report not taking their medicines as prescribed at some point in the past year because of the cost.\u201d<\/p>\n

Most employers want to keep money in their workers\u2019 pockets. \u201cEmployees are already dealing with high financial exposures on their current health insurance plans, and they\u2019re all pressed for money as well,\u201d says Marcus Newman, vice president for benefits consulting at GCG Financial, an Alera Group company. \u201cHow much more risk can we ask them to shoulder?\u201d <\/p>\n

\"ScreenMedical expenses are already hampering many people in the U.S. Even among those with employer-provided health insurance, 61 percent reported carrying medical debt, according to a February 2022 survey by AffordableHealthInsurance.com, a health insurance website. Overall, nearly one-fourth (23 percent) of those with medical debt for out-of-pocket health bills owe more than $10,000. Many have delayed buying a house or saving for retirement because of the debt.<\/p>\n

Newman suggests that employers explore strategies such as partially self-funded plans for small businesses, which, depending on the organization\u2019s workforce demographics, may be more cost-effective than a fully insured plan. Another option is to make use of health reimbursement arrangements or HSAs to encourage plan participants to make cost-conscious spending choices when they\u2019re able to do so, he says.<\/p>\n

In a CFO Perspective on Health survey<\/a> fielded by Mercer earlier this year, corporate chief financial officers (CFOs) and finance officers responsible for health care oversight indicated that over the next three years, they intend to strongly or very strongly emphasize cost-management strategies such as:<\/p>\n