Controlling ever-increasing healthcare benefits costs is a top priority for two out of three employers over the next three years. And that’s not going to be easy, as costs are expected to continue their upward trajectory for the foreseeable future.
While employers dealt with a 5% increase in healthcare costs this year, experts are predicting the jump next year to be 6%.
To help manage the rising costs, employers are implementing new initiatives that will hopefully make benefits more affordable for their employees, according to a new survey by WTW, a global advisory, broking and solutions company.
“With no end in sight to projected cost increases, the need to manage healthcare costs and address employee affordability has never been greater,” said Courtney Stubblefield, insights & solutions leader, health & benefits, WTW. “Yet, with so many potential actions, employers must focus on changes that go beyond addressing their employees’ needs to also support efforts to attract and retain talent during a tight labor market.”
5 strategies to control healthcare benefits costs
The report, which surveyed 455 employers, found companies are using a number of different tactics to manage costs and enhance employee affordability. Here are five of them:
Defined contributions: Instead of offering a set of benefits and paying the same percentage each year, 41% of employers plan to use a defined contribution strategy. They’ll pay a fixed dollar amount to all employees, but it’ll change according to the different employee tiers. An additional 11% have this initiative in their playbook for the not-too-distant future.
Assess contributions by income: Over the next two years, 32% of employers said they’ll look at employee health payroll contributions as the basis for benefit design decisions. That’s a 19% increase compared to 2022.
Low-deductible plan: Thirty-two percent of employers are offering a plan with low member cost-sharing this year with another 7% considering this option over the next two years.
Contribution banding: Twenty-eight percent structured payroll contributions to ease costs for specific groups, such as low-wage employees. Thirteen percent of employers have this earmarked for the near future.
Upping budget: Twenty percent of employers said increasing their healthcare plan budget is how they plan to tackle the rising benefits costs immediately. And they aren’t going to steal from Peter to pay Paul. That would just take other benefits away from their employees. In addition, another 30% said while they aren’t doing a budget expansion now, they expect to implement it over the next few years.
“Employers that act now to predict, plan and implement solutions and strategies that balance employee affordability objectives with escalating prices can avoid having to take desperate measures in a rising healthcare cost environment,” said Tim Stawicki, chief actuary, health & benefits, WTW. “Without question, employers face difficult challenges in the next few years. And with limited budgets, the challenge of making decisions that consider healthcare affordability and engagement is exponentially greater.”