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How Changing Healthcare Needs Is Impacting Employer Health Insurance

June 21, 2023, by New City Insurance

drugs cost rising conceptInflation and other factors greatly impact the healthcare industry and put employer health insurance at risk. According to McKinsey’s latest analysis, the annual U.S. national health expenditure is expected to be $370 billion higher by 2027 due to inflation compared to pre-COVID-19 levels.

While many insurance providers already feel these effects, the most significant impact is on employers and consumers. McKinsey predicts that healthcare costs for employers could increase by 9 to 10 percent per year through 2026.

The United States has one of the most complex healthcare systems in the world, and as a result, changes in the industry are generally slow. However, many technological and environmental factors have contributed to changes in healthcare, many of which are likely to impact employer health insurance in the near future.

The Evolving Landscape of Employer-Sponsored Health Insurance

For decades, employer-sponsored health insurance has helped countless Americans maintain good health and wellness. It remains the primary source of health coverage for approximately 54.3 percent of the U.S. population.

The roots of employer-sponsored health insurance in the U.S. date back to the early 20th century when several major companies started offering employees health coverage as a benefit. During this time, employers could not raise wages due to price and wage controls during World War II, making health insurance a valuable benefit that was appealing to many workers.

Rising healthcare costs in the 1970s and 1980s caused a shift towards managed care. Several managed care organizations, such as Preferred Provider Organizations (PPOs) and Health Maintenance Organizations (HMOs), emerged as popular options as they helped to curb healthcare spending.

By 2010, the Affordable Care Act (ACA) was passed, resulting in a significant shift in the health insurance landscape. This act helped expand healthcare coverage, improve quality of care, and better regulate the health insurance market.

During this time, consumer-driven health plans (CDHPs), such as Health Savings Accounts (HSAs), gained popularity. CDHPs commonly featured tax-advantaged accounts with high-deductible health plans (HDHPs), motivating people to make more cost-conscious healthcare decisions.

Factors Influencing Employer-Sponsored Health Plan Costs

customize health plan conceptEmployers throughout the U.S. can expect medical plan costs to rise 5.6 percent on average per employee in 2023, according to Mercer’s National Survey of Employer-Sponsored Health Plans. Due to many healthcare plans having multi-year contracts with healthcare providers, the full impact of inflation in the health industry has not yet been felt.

However, as more contracts reach their renewal period and providers negotiate higher reimbursement levels, employers can expect to see higher healthcare prices. Some of the key factors that are influencing employer-sponsored health plan costs include the following:

The Aftermath of the COVID-19 Pandemic

Since the start of COVID-19, it has been questioned whether premium rates should continue to be influenced by pandemic-related factors. When setting premium rates in 2022, several factors were considered, such as legislative changes, telehealth utilization, and American Rescue Plan subsidies.

While nearly half of all payers claimed that the pandemic would not impact their rates, premiums were a major concern for consumers during the pandemic. Although several years have passed, challenges related to the COVID-19 pandemic remain and continue to influence premium-setting in 2023.

The Impact of New Healthcare Technology

Emerging technologies in the healthcare sector have saved countless lives and improved the overall quality of care. However, new technology is also to blame for the continuing increase in medical costs.

Some innovations, such as vaccines, lead to lower short-term spending, but other medical advances cause spending to increase, such as new treatments for previously untreatable terminal conditions. According to Forbes, new medical technologies are responsible for 40 to 50 percent of annual cost increases.

The impact of any new technology on healthcare costs depends on several key factors, such as if the new technology supplements existing treatments and if it is a full or partial substitute. In addition, costs are affected based on whether the new technology will affect the cost or use of other healthcare services like doctor visits or hospital stays.

Employers and Employees are Under Financial Burden

Both employers and employers are feeling the effects of increasing healthcare costs. According to a Los Angeles Times and Kaiser Family Foundation survey, 2 in 5 adults covered by employer-sponsored insurance reported having difficulty affording their premiums, medical care, and prescription drugs.

Employer-sponsored insurance premiums continue to outpace inflation and wage growth, causing workers to experience the financial burden of affordable healthcare and other essentials. This burden tends to affect lower-income employees the most.

A 2022 Employer Health Benefits Annual Survey by KFF revealed that companies with more low-wage employees, on average, contributed 10 percent less toward single coverage premiums and 13 percent less to family health coverage premiums compared to companies with fewer low-wage workers.

Rising Premiums and Out-of-Pocket Costs

Despite many employers implementing new policies and programs to help improve healthcare affordability, employees will likely continue to experience cost increases. According to a survey by Willis Towers Watson (WTW), one in four employers plan to shift these rising costs to employees through higher premiums.

The survey also revealed that 23 percent of respondents implemented higher out-of-pocket costs for using less efficient services, such as high-cost imaging facilities and non-preferred labs. By 2024, nearly one in five employers will use this strategy to help discourage these costly practices.

There are several reasons behind rising healthcare costs in the U.S. The population continues to grow unhealthier, with at least half of people in the United States having at least one chronic disease, according to the Centers for Disease Control and Prevention (CDC).

New technologies, lack of control in choosing their healthcare plan, and inflation’s impact on the economy have all contributed to rising healthcare expenses.

The Impact on Employee Wages and Overall Compensation

Rising healthcare costs are becoming more evident to employees as premium contributions are generally deducted on pay stubs. In contrast, out-of-pocket costs are paid through medical bills or directly at the point of care.

However, employers remain responsible for the bulk share of employee healthcare costs. The Kaiser Family Foundation found that employers were responsible for 66 percent of total health expenditures for employees with family coverage on average.

Employers are looking for ways to reduce their share of healthcare costs, such as by passing on these expenses to employees. This is done in a number of ways, such as by increasing copayments or deductibles, increasing worker premium contributions, or reducing employment.

Employer Strategies for Adapting to Changing Healthcare Needs

While change is an inevitable fact of life, there are strategies that employers can implement to better adapt to changing healthcare needs.

The pandemic caused widespread disruptions in many businesses’ cost-management efforts as employers focused solely on workplace safety. However, with healthcare costs increasing, many employers are refocusing on cost management strategies to slow this cost growth over the long term.

Employers are implementing various effective strategies to improve healthcare affordability, such as introducing programs to improve health condition management, managing the cost of specialty prescription drugs, and steering employees toward high-value care.

Some other employer strategies for adapting to changing healthcare needs include the following:

Personalize Health Insurance Options

Over the last decade, many businesses have shifted from offering workers traditional benefits to a new and improved model: personalized benefits. This newer model enables businesses of all sizes to provide employees with sustainable and attractive benefits that deliver real value.

Employees have specific wants and needs, and while it is not always possible to address every employee’s needs individually, employers can offer universally desired benefits.

There are several ways that employers can implement a personalized employee experience, such as by providing workers with a monthly or annual expense allowance through an employee reimbursement card or lifestyle savings account (LSA).

Reimbursement plans enable employers to review and analyze employee expenses and reimburse workers for approved expenses, such as medical and remote work costs. Offering personalized health insurance options is also an excellent way to attract and retain top talent.

Integrate Health Technology

To adapt to changing healthcare, employers must be open to new technologies and understand the rising costs associated with advanced tech in the healthcare sector. In the modern age, employees require access to a plan design that includes telehealth options.

This type of plan allows employees to access quality healthcare without physically entering a healthcare facility but also gives employees access to a network of specialists, such as psychologists, nutritionists, and mental health experts.

This is especially important post-COVID as nearly half of all Americans revealed in a National Institutes of Health (NIH) survey that they have had recent symptoms of anxiety or depressive disorder.

Many insurance providers across the country are employing personalized services in an attempt to attract more customers as well as reduce costs for their customers. Many big players in the industry are also implementing AI tools and Big Data to help improve healthcare services.

Protect Your Employees with Comprehensive Employer-Sponsored Health Insurance Plans by New City

Inflationary pressures in the U.S. could possibly increase annual employer healthcare expenses and directly affect vulnerable household finances. Increased affordability challenges, coupled with issues exacerbated by the COVID-19 pandemic, have resulted in troubling healthcare changes affecting employer-sponsored health insurance.

Working with an experienced employee benefits consulting firm is critical to achieving long-term cost savings without sacrificing plan quality. The team of highly qualified benefits consultants at

New City Insurance builds custom plans with all major carriers to maintain employee networks, improve coverage and cut costs. To learn more, request a consultation with New City or call 888.210.2765.

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New City Insurance
New City Insurance
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Briar Schwartz
Briar Schwartz
05:38 10 Apr 25
Working with the team at New City Insurance was a great experience, couldn’t recommend it enough. Being completely new to the insurance world, both Clayton and Eric were thoughtful and kind, and most importantly patient with my many questions. All in all 5/5 stars. Thank you New City!
Iris deBruin
Iris deBruin
03:24 10 Apr 25
The team at New City was incredible. Clayton walked me through every step, made everything easy to understand, and was always there when I had questions. I felt supported the whole way through—can’t recommend them enough!
Lea R
Lea R
22:46 09 Apr 25
New City was outstanding from start to finish. Incredibly professional, responsive, and genuinely caring. They made everything easy to understand and completely stress-free. Couldn’t recommend them more!
Brooks Chiongbian
Brooks Chiongbian
21:21 07 Apr 25
I ran into an issue with our carrier and Nick got right to the bottom of things. He and his team were incredibly responsive and helpful, making what could have been a frustrating situation so much easier to handle. They really went above and beyond to make sure everything was resolved quickly and smoothly. I’m super grateful for their support and highly recommend New City Insurance to anyone looking for a team that truly cares about their clients!
Elizabeth Teposte
Elizabeth Teposte
23:35 02 Apr 25
My Experience with New City has been amazing. Team Eric has been great, especially Nicholas Rebis their follow up time is a 10/10. I'm currently helping an employee out with her questions and have been running to Nicholas, before I say bye to our team member, letting her know I will follow up as soon as I hear something, I see his response. Thank you to the team for making it easier for me to assist our employees during difficult times.
Chelsea Antczak
Chelsea Antczak
17:54 02 Apr 25
New City Insurance is an outstanding company that genuinely prioritizes its clients. They are professional, highly knowledgeable, and always delivers the best solutions. I highly recommend them to anyone seeking a trusted insurance advisor who truly has your back.
Stephanie Gillon
Stephanie Gillon
19:16 22 Mar 25
I'm here to tell the world to look no further in your insurance search! Seriously, this company is it. I am beyond impressed with the skill set of this team. They are extremely motivated and dedicated to helping their clients and offer top-tier service. I was treated with such care and professionalism throughout our entire interaction together. Thank you, Eric and team, for being so thorough, kind, and efficient while helping me find the lowest prices possible!
Roshaun LaForce
Roshaun LaForce
23:06 20 Mar 25
New City Insurance has such a great team. They genuinely care about their clients and make the whole process easy!
Alec Remington
Alec Remington
00:54 20 Mar 25
A great team of hard workers. My experience with them has been nothing but positive. Highly recommended.
Morgan Ostrander
Morgan Ostrander
16:00 19 Mar 25
Great team to work with! They lowered our costs and have provided excellent service.
Zach Baker
Zach Baker
15:19 19 Mar 25
Eric and the team at New City Insurance are truly top-notch. It’s clear they genuinely care about their clients and work hard to provide the best service possible. Their integrity and dedication really set them apart. Highly recommend!
Momo Furusho
Momo Furusho
13:24 19 Mar 25
New City is run by not just a competent team, but people who genuinely care about providing the best service possible. Eric Calciano is a gem!
Allie B
Allie B
19:34 04 Feb 25
Excellent service and support from start to finish! The NCI team is professional, responsive and truly cares about their customers.
Deana Hartland
Deana Hartland
16:04 14 Jan 25
These guys are great and definitely go above and beyond. We were overcharged for a surgery that my husband had in Aug 2024 due to the contract that they had with our health insurance. It was very difficult trying to work and deal with trying to get this refund back from the surgical hospital we went to. A lot of playing phone tag with them. My husbands HR team got "Nicholas" involved and OMG.....he just handled everything. He stayed in constant contact with me via email on every step of the way. Eventually he was able to get this money refunded that was $997. He has been on top of it from day one. I must say he took all of the stress off of me dealing with this situation during my working hours and went ABOVE AND BEYOND the call of duty. I am so happy they got involved and relived me from dealing with this and the stress it would've caused me. You will be very blessed working with a company such as this. Keep doing what your doing!
Justin Hoffman
Justin Hoffman
02:52 17 Oct 24
Always quick to respond. This team is up early and late.
Roger
Roger
16:30 30 Aug 24
Eric Calciano, is as sharp and knowledgeable about health benefits and insurance, as anyone I've ever come across. If you need any kind of benefits analysis I highly recommend him and his firm. He is easy to work with and highly professional.
Timothy Burke
Timothy Burke
04:02 30 Aug 24
I don't leave reviews often, but this one is well deserved and overdue. Clayton provided services to my company prior to his move into the insurance world a few years ago. Always being incredibly impressed with his talent and strong communication skills, I decided to switch our insurance broker and give New City a shot. That turned out to be a great move.The first year, Clayton actually jumped on a plane and flew from Oregon to California just to be onsite and administer open enrollment for my 45 employees. Clayton, Eric, Jeff, Brendan, and the entire team have been a pleasure to work with over the years. The communication, response time, and insurance knowledge is second to none in my opinion. A legitimate 10/10. They are great listeners and strive to really understand the needs of their customers.I'm very selective about giving referrals and making recommendations, but New City has never disappointed. If you are reading these reviews to help make your decision on selecting an insurance broker, this team is 100% a solid option. And if you don't believe me, just look at the other reviews.
Megan Ketter
Megan Ketter
19:48 28 Aug 24
Excellent customer service. Brendan and team are professional, timely, and so appreciated when navigating this complicated insurance world. Very thankfully for them! Highly recommended.
Ailene Chow
Ailene Chow
23:15 26 Sep 23
We have been working with New City Insurance since 2019 at the start of our company and has not look back since. They are responsive and proactive when it comes to advise and also market analysis on what's there in the marketplace. Unfortunately insurance benefits costs has been increasing yearly with differences in the percentage of increase . The New City folks reaches out months before the impending increase takes places and help relook into options or recommendations that they see fit. We were a company of 2 to now 7 permanent staff . While we are small , this company still takes care of us well.
Carol Zhang
Carol Zhang
04:29 06 Mar 22
As a rapidly expanding national media organization, the employee benefits strategy and administration that New City has provided us during our growth has been invaluable. They have been proactive about informing us of the different benefit strategies available to us as we grow as well as managing the additional compliance laws and reporting requirements at each stage of our growth.
Claudia Villalobos
Claudia Villalobos
20:14 03 Mar 22
New City Insurance made navigating through all the health insurances super EASY. Their documents are highly informative, professional, and easy to work with. Thank you for making the process of choosing a health plan so simple. You guys are THE BEST!
Philippe Salas
Philippe Salas
17:02 22 Feb 22
I never expected to have a good time talking to an insurance salesman, but let me tell you Brendan was quite the treat. He was very helpful explaining the options and has a wonderful sense of humor. I hope to speak with him every time I call.
Jennifer Polito
Jennifer Polito
17:15 09 Feb 22
Super easy enrollment process. Fast and friendly customer service. If you are looking for an insurance company that is there for you every step of the way I highly recommend New City Insurance.
Rocky Salas
Rocky Salas
23:46 07 Jan 22
So friendly, I hope to speak to him again in all my future insurance needs.
Rocky Salas
Rocky Salas
23:38 07 Jan 22
So friendly and soft spoken. I hope to speak to him again in all my future insurance needs.
Jose Brena
Jose Brena
13:20 06 Jan 22
Eric Calciano has been extremely helpful in finding and selecting the right insurance coverage for our company. With many options out there Eric assisted us on getting a low cost provider saving more than 20% than from our competitors and providing excellent coverage for our employees.
Anastasia Beaverhousen
Anastasia Beaverhousen
17:05 28 Dec 21
Signing up for insurance was quick and easy. Felicity Sundsboe
SFCC
SFCC
22:08 29 Nov 21
Jeff Stoltey and his team provide excellent customer service. Jeff has always provided my company SFCC with straightforward options. I went to a larger insurance company only to RUN BACK to Jeff at New City Insurance. I recommend them to anyone needing insurance without hesitation.
Kevin Luby
Kevin Luby
19:13 22 Oct 21
Quick, easy & informative. We were able to secure quality insurance for our small business on a tight deadline. Thanks for the help New City.
Theresa Ruybol
Theresa Ruybol
19:30 01 Jul 21
Eric was so great with us. He was very patient and kind as we are a newer smaller organization who is growing rapidly. With that said, we had made our inquiry, he had great rapid response and mostly had to wait on me. Any request that we made and/or questions we had, he was great answering and helping us understand. Then when we were ready for all documents and to move forward, Brendan helped with getting that together and the two of them worked their magic on New City's end to notify me of what was needed, assist me in that process and confirming that all was complete and approved for the coverage. I just want to say thank you all again so much, as insurance has always been confusing to me, and you all made that process go a lot smoother.Thank you
Andrea Ordendorff
Andrea Ordendorff
21:06 07 May 21
I've been working with both Clayton and Brendan for well over a year. As the purchase of our dental practice was delayed well over 14 months they both patiently supported me and continued to make themselves available. When we were officially ready to sign up they made the whole process seamless and super easy. This team is highly knowledgeable, professional, supportive, and efficient! I can't thank them enough for everything they've done.
T W
T W
22:32 30 Aug 20
I love New City Insurance. I never had a good experience dealing with insurance brokers until I started working with Brendan. He’s awesome! He is patient with me and takes the time to answer all my questions. I’m very grateful for all his help and hard work!
Mary Jane Deyette
Mary Jane Deyette
00:57 11 May 20
Jeff Stoltey is so awesome...even thru my company had only two employees, he took the time each year to research and find the best plan for us. The only reason I am leaving New City Insurance is because we no longer have any employees. Thank you Jeff
Alma Ortiz
Alma Ortiz
22:25 23 Feb 20
Brendan was awesome! I couldn't figure out how to pick my plan and he returned my call on a weekend to help me. Outstansing service!
jessica kavanagh
jessica kavanagh
19:53 13 Feb 20
Brendan was so helpful I definitely recommend him if you’re in need of good help and getting it done promptly. Thankyou so much again.
Tricia DeYoung
Tricia DeYoung
19:49 13 Feb 20
I was very thankful I inquired about this info. with Brendan. He was very helpful so I understand the benefits available much better now. Thank you Brendan.
B Bayer
B Bayer
17:43 24 Sep 19
NCI handled almost everything from start to finish. Clayton and Brendan made the plans easy to understand and walked me through the application process. They got me my ID numbers before my cards arrived so that I could keep an appointment I had already scheduled. My last broker wouldn't have done that. 5 stars!
Jessica Lehr
Jessica Lehr
03:36 07 Jun 19
Our staff was interested in a health plan, but we didn't know how beneficial a solid employee benefits package would be for our business to expand. We'd lose prospective employees because they had more options for their medical insurance which was sometimes more valuable than more pay. The New City team was amazing and gave us as many affordable options as possible so that everyone had their needs met.
Mike McClay
Mike McClay
19:36 03 May 19
My employer uses New City as their insurance broker, and I'm always amazed when I call in for assistance by how knowledgeable and attentive their staff is with my requests. Their online benefits platform makes selecting insurance plans pretty darn easy. I would highly recommend their services.
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