Health care costs are expected to increase significantly in 2024. In fact, several industry surveys and reports find that employers anticipate health care costs to grow between 6.5% and 8.5% in the coming year, representing the largest increase in more than a decade. As a result, employer-sponsored health care may cost more than $15,000 per employee.
While most employers avoid shifting costs to employees as much as possible, it’s inevitable that the impact of these increases will be felt by employers and employees alike. So, how are employers responding to this expected price hike, and what steps can your organization take to help employees smoothly navigate any subsequent benefit changes? Read on to find out.
Why Are Health Care Costs Rising?
Several market conditions have recently led to steep increases in health care costs. Utilization, especially for catastrophic claims and among individuals with chronic health conditions, has rebounded, resulting in medical plan costs returning to pre-pandemic levels.
Inflation is also a chief contributor, as hospitals and medical providers are increasing prices to address rising employee wages and supply costs.
Other factors that are expected to contribute to rising health care costs in 2024 include:
- Specialty and costly prescription drugs, especially the high demand for diabetes drugs
- Cell and gene therapies
- Technological advancements
- Workforce shortages
These market conditions started affecting insurance rates and contracts in 2023, and their impact is only expected to grow in 2024. As a result, increases in health plan expenses are expected to impact all employers, regardless of size and whether they are fully or self-insured.
How Employers Are Responding to Rising Costs
To avoid passing increasing health care costs onto their employees, many employers are expected to embrace cost-control initiatives in 2024, such as requiring prior authorization, utilizing disease management and adding nurse advice lines.
Other strategies employers will likely implement to manage rising health care costs include:
- Wellness programs
- Plan design initiatives (e.g., offering high deductible health plans, requiring spousal surcharges or carve-outs and conducting dependent eligibility audits)
- Offering telemedicine, price transparency tools and centers for excellence
How to Help Employees Navigate Resulting Benefit Changes
If your organization is making changes to your health insurance plans and offerings to combat rising health care costs, it’s important to remember that employee communication is key. How you communicate about rising costs and any subsequent benefits changes often impacts whether they’re understood and accepted.
For example, if changes to benefits plans result in increased costs or reduced offerings for employees, you can find ways to communicate not only takeaways but also givebacks (e.g., increasing employee premium contributions but adding certain supplemental benefits, such as transportation benefits). This approach allows employers to demonstrate that they’re mindful of employees’ financial burden and strengthen loyalty and trust with their workforce.
At CBIZ, our Total Rewards Communications Consulting Practice is solely focused on helping employers establish effective, consistent communication with their employees — something that’s sure to become increasingly important in 2024.
To learn more about how CBIZ can help you talk to your workforce about rising health care costs, connect with our team today.