It’s no secret that health care costs have risen sharply over the past two decades, and they’re expected to continue to climb. While it may be tempting to skip right to cost-mitigation solutions, you can’t reduce your health care spending until you determine what aspects of your health plan are driving costs.
In this article, we provide a jumping-off point to help you do just that by exploring some of the most common health care cost drivers impacting employers across the nation.
Common Health Care Cost Drivers
Every organization’s health care expenses will look different depending on industry, size, workforce demographics and more. However, there are a few cost drivers that are problem areas for a wide range of employers.
Skyrocketing Prescription Costs
According to a study conducted by GoodRx, prescription drug prices have increased 35% since 2014, outpacing the rate of inflation. Year after year, these expenses continue to plague employers, with outpatient prescription drugs accounting for approximately 9% of total health care spending.
Increasing Chronic Conditions
Chronic conditions not only deeply affect those who suffer from them but can also lead to increased medical expenditures and lost productivity for employers. Approximately 133 million Americans live with a chronic disease and, as a nation, 86% of our health care dollars go to treatment of these diseases.
Health care services are being utilized now more than ever. Improved medical tech, elevated consumer awareness and demand, and the influence of managed care have all contributed to the spike in surgical procedures conducted and prescription drugs dispensed. In addition, breast cancer screenings, immunizations for children and diagnostic procedures have experienced sharp increases in utilization.
The number of Americans ages 65 and older is expected to double by 2025, and the elderly population will increase by 80%, according to the U.S. Census Bureau. As this population ages, there is a subsequent rise in chronic diseases, such as asthma, heart disease and cancer. Increased prevalence of these diseases means increased use of prescription drugs and other medical services. This leads to an overall increase in health care spending.
Declining Health Literacy
The U.S. Department of Education determined that more than 1 in 3 Americans have difficulty with common health tasks, from reading a prescription label to making wise health care decisions. Low health literacy often results in higher utilization of basic — and expensive — health services, such as emergency care and inpatient visits. These services add up quickly, and it is estimated that declining health literacy costs the U.S. up to $238 billion annually.
How Can Employers Combat Rising Costs?
So, how can employers mitigate health care costs and build a valuable benefits program that won’t break the bank? There are a variety of solutions to this problem, including swapping to a self-insurance health plan, employing reference-based pricing, considering cost sharing and more.
If you’re looking to maximize your ability to offer competitive, cost-effective benefits, consider connecting with CBIZ’s Health Innovations Practice. Through service to hundreds of large employer clients with generationally and geographically diverse employees, we provide insight backed by multi-disciplined expertise and advanced data analytics.