Amid inflationary pressures and continued economic uncertainty, it’s no surprise that industry experts are calling for a significant increase in employer-sponsored health care costs in 2024.
According to Aon, health care costs for employers are projected to increase by 8.5% in the coming year, reaching more than $15,000 per employee. Similarly, the Business Group on Health’s 2024 Large Employer Health Care Strategy Survey predicts a 6% increase in health care costs in 2024 while Mercer and WTW estimate health care cost increases of 5.4% and 6.4%, respectively.
What are the driving forces behind increasing health care costs, and how are employers taking action to combat them? Read on to find out.
Increasing Pharmacy Costs
Skyrocketing pharmacy costs will continue to drive up the cost of employer-sponsored health care in 2024, mostly due to high-cost specialty medications, as well as a lack of transparency in Pharmacy Benefit Manager (PBM) pricing and contracting.
To address rising drug costs, many employers are prioritizing transparent PBM practices by requesting detailed reports, auditing PBM services, requiring compensation and pricing disclosures, negotiating contract terms, and making plan design changes to address costly medications and treatments, such as offering step therapy and sites of care management.
More Late-Stage Cancers Among Employees
During the pandemic, preventive screenings — a once critical health care component — were disrupted. As a result, employers are anticipating more late-stage cancers among employees and, subsequently, higher cancer care costs. In fact, 50% of employers report cancer is the number one driver of health care costs, and 53% plan to offer a cancer-focused center of excellence approach in 2024, according to the Business Group on Health.
In response to rising cancer care costs, employers are monitoring oncology clinical advancements, such as biomarker testing and immunotherapies, and honing in on how best to guide employees to high-quality care to improve health outcomes.
High Demand for Innovative Health Care Delivery
Health care innovations, specifically on-site or near-site clinics and virtual care, gained popularity during the pandemic, and such types of care continue to be critical for employees as they prioritize primary or preventive health care.
The Business Group on Health found that employers’ number two priority for 2024 is implementing more virtual health opportunities and evaluating partnerships to consider vendors that can seamlessly integrate with others. In addition, 53% of employers are expected to offer on-site clinics in 2024.
Moving forward, more employers are seeking innovative ways to better support their workforce — and those innovative solutions are likely to contribute to rising health care costs.
Proactively Cut Costs by Prioritizing Employee Communication
Increased health care costs are likely to continue impacting employers for the foreseeable future. In 2024, organizations should consider enhancing benefits education and employee communication to proactively contain costs. By helping your employees understand their benefits and how to maximize them, you can help them stretch their hard-earned dollars further while curbing costs and protecting your bottom line.
Looking for guidance to optimize your employee communications strategy? Download our Guide to Building a Year-Round Communications Strategy.
Connect with a benefits advisor to discover how you can manage health care costs in 2024.