With inflation a top-of-mind concern for consumers and companies alike, many are all too aware that health care is not exempt from rising costs.
According to the Centers for Medicare & Medicaid Services, the national health expenditure will grow by an average 5.1% each year until 2030, reaching $6.8 trillion. The COVID-19 pandemic saw health care the health care labor pool dwindle, supplies get caught on shipping containers, and prescription drug prices rise, bringing health care costs to an all-time high. Although these costs moderated in 2022, they are still above the norm and expected to increase each year. Because of rising costs, CMS predicts that the insured share of the population will dip below 89.8% in 2030 and that drop will be caused by falling employer offer rates and falling employee take-up rates of health care.
To help their clients manage health care costs in 2023, brokers must help employers understand why health care costs are rising in the first place, help employers plan ahead, and emphasize the importance of employee health care literacy.
There is no single reason why health care costs are rising; the answer varies by plan and employer. While new prescription drugs, life-saving therapies and deferred care during the pandemic have driven up overall health care costs, supply and demand, as well as the increased cost of prescription drugs and provider shortages, also are impacting costs.
However, employers must work with their brokers and carriers to assess their claims data and identify high or recurring cost claims. Determining the frequency of controllable factors such as inappropriate use (such going to the emergency room for non-emergencies and using high-cost drugs when less expensive alternatives are available); patterns of health issues (back or other musculoskeletal problems), and elective procedures performed at higher-cost facilities, versus uncontrollable factors such as incidence of premature childbirth, cancer or long COVID-19 can point to potential plan design, communication and education solutions.
2) Planning ahead
Although open enrollment for 2024 seems far away, employers and human resource teams must start preparing now to keep costs down for all parties involved. According to a report by Optavise, 89% of brokers surveyed reported that clients rely on them to contain health care costs.
Drawing from the insights gleaned from the claims analysis referred to earlier, potential solutions might include the addition of virtual primary care networks, revisiting cost-sharing formulas and incentivizing employees to seek lower-cost care options. Reducing costs does not have to wait until 2024; brokers can begin identifying partners to implement advocacy and transparency programs to help employees shop for care, and can help employers communicate concrete ways to save money and start healthy health care spending habits among employees. By planning ahead for the next open enrollment season, employers can reduce the overall company-wide health care spend, ultimately reducing costs for both the company and its employees and their families.
3) Emphasizing the importance of health care literacy
According to a consumer survey conducted by Optavise, employees want to understand how benefits affect their finances. Workers also expressed interest in improving their understanding of how to manage their health care costs as a part of financial wellness. Twenty-nine percent of employees want to know how to research health care costs and why it matters, 39% want to understand how to avoid surprise medical bills, and 33% want to know how their deductible, copay/coinsurance, and out-of-pocket maximum work and what they mean for their wallet.
Too often, however, employees self-educate about these critical topics rather than seeking expert advice: Optavise found that only 30% of respondents reported they had learned about health insurance terms and processes from a member of their employer’s HR team in 2022. However, 21% reported that they learned about terms and processes from a third-party resource (like a benefits educator or broker) offered by their employer, up from 16% in 2021. Employers realize they need help reaching their workforce as 95% of brokers reported seeing moderate to high demand for help with benefits communications in 2022, and the same can be expected for 2023. Helping employees understand their benefits through online resources, one-on-one meetings and Q&A sessions not only improves employee understanding of their health insurance plan, but it can also empower them to make the right decisions.
Demonstrating how employees can get the most from their plans, such as using in-network specialists and primary care physicians, can keep costs low year-round. Greater use of primary care, for example, is associated with lower costs, higher patient satisfaction, fewer hospitalizations and fewer emergency department visits. Further, annual check-ups are a great way to detect health issues before they become acute or chronic and therefore more expensive to treat.
Open communication with employees is instrumental in reducing costs. Few employees already understand or make the connection that the medical services they use directly influence the cost of their health plan. Brokers understand that their success depends on their ability to truly connect and counsel their clients. Identifying and discussing why their client’s healthcare costs are going up are critical first steps to this success, but must be followed by an action plan to ensure a successful financial future for their clients and employees for years to come.
Kim Buckey is vice president of client services at Optavise. She may be contacted at [email protected].