Many finance leaders are worried about rising health benefit costs. A recent survey by Mercer revealed that 80% of CFOs believe any annual increase in health costs over 6% would be unsustainable over three years. Only 1% could accept increases exceeding 10%, while 16% might manage hikes between 7% and 8%. This survey was conducted in February and indicates a significant concern among finance chiefs.
In contrast, another Mercer report projects that average health costs in the U.S. will rise by 6.7% this year, a 15-year high. This increase comes after companies tried to cut costs, which were initially expected to grow by 9% this year. It seems many CFOs lack confidence in their cost-cutting strategies. Over half reported doubts about the effectiveness of their money-saving efforts.
So, how are CFOs planning to reduce these expenses? Many are considering raising deductibles. About 45% of CFOs believe changes in plan design, like higher deductibles, should be strongly prioritized. On the other hand, raising premiums is less popular, with only 38% favoring that option.
According to Beth Umland, director of health research at Mercer, employees’ ability to handle these cost changes might shape CFOs’ perspectives. She notes, “Premium increases reduce workers’ take-home pay, but higher cost-sharing only impacts those who actually need care.” This means that in companies where employees are well-paid, CFOs may prioritize avoiding premium hikes, as those can hinder pay raises.
Interestingly, Umland mentioned that many employers are moving away from cost-shifting tactics, like raising deductibles and copays. For some, a return to such strategies feels aggressive. Instead, some organizations are looking at different solutions, such as adopting a medical plan with a narrower provider network.
As CFOs navigate these rising costs, staying in touch with their benefit teams will be crucial. Understanding the trade-offs will help them make informed decisions about health benefits for their employees.
In a broader context, costs related to health care have been a growing concern for years. In fact, a recent study from the American Health Association showed that health care spending in the U.S. reached nearly $4 trillion in 2021, and projections indicate that this number will only continue to rise. This trend emphasizes the need for effective cost management strategies in organizations.
In conclusion, as companies confront these rising health benefit costs, the focus is not only on cost-cutting but also on how these decisions affect employees’ lives. The balance between managing expenses and supporting employees remains a sensitive topic within the finance community.
