Employer-sponsored health care remains one of the most sought-after employee benefits across America. Unfortunately, rising health care premiums have made it difficult for many plan participants to continue coverage. According to Willis Towers Watson, employers can expect health coverage costs to jump at least 5%-9% over the next year. Randa Deaton of Purchaser Business Group on Health predicts a 10%-12% increase.
Why does this larger-than-usual jump matter? According to Axios, this latest ballooning cost is expected to be passed down to nearly 50 percent of Americans who currently receive coverage through their employer. Rising costs of employer-sponsored health care premiums have forced many companies to reduce benefits, lower contributions, or eliminate health plans altogether.
Much uncertainty remains concerning how much more and for how long premiums will rise. In the meantime, it is important for employers to understand the severity of these increases and what they can do to reduce costs while maintaining quality benefits.
Rising Premiums – Why Is It Happening?
According to Mercer’s 2021 National Survey of Employer-Sponsored Health Plans, the average per-employee cost of employer-sponsored health insurance increased 6.3 percent in 2021.
Many employers have chosen to pass on these costs to their workers, resulting in a high degree of scrutiny. Employers struggle to maintain an affordable health care plan that is accessible to everyone while facing rising cost pressures. Finding a solution to these rising costs is critical to retaining talent, reducing turnover and maintaining morale.
Health care costs in the US have risen dramatically over the past several decades. In fact, a study by the Kaiser Family Foundation (KFF) and the Peterson Center on Healthcare found that, when adjusted for inflation, health care spending increased nearly a trillion dollars from 2009 to 2019.
The study showed that health care spending in 2019 was nearly $3.8 trillion, or approximately $11,582 per person. These costs are expected to reach $6.2 trillion, or around $18,000 per person, by 2028.
So, what exactly is causing this rapid rise in employer-sponsored health care costs? A combination of factors is at play. Inflation is a leading cause of rising premium costs. Health spending and medical care costs typically outpace growth in the rest of the economy.
Moreover, health care expenses represent a large share of gross domestic product and many families are feeling the pressure as the cost of health services and premiums start to grow at a rate that surpasses their wages.
Increased provider expenses may also be to blame for the rising costs of employer-sponsored health care premiums. Currently, hospitals and health care providers are well-positioned to demand higher prices.
A recent report by the Center for Studying Health System Change found partnerships and mergers between insurers and medical providers to be one of the most prominent trends in the country’s health care system. Lower individual market competition has put insurers and providers in a position where, without opposition, they can drive up health care service prices.
The COVID-19 pandemic has also played a critical role in rising premiums. Throughout much of 2020 and into 2021, many states in the US were shut down to prevent the spread of the coronavirus, preventing many individuals from receiving the care they would normally receive otherwise. Now that the country is open once again, consumers’ use of health care services continues to rise as more people schedule the care that they deferred during the pandemic.
Customized Health Care Plan Solutions
As health care premiums continue to rise, many employers are left unsure of how to keep coverage expenses manageable. Most businesses do their best to avoid passing on increased costs to employees but may feel compelled to cut back on benefits or reduce contributions to make up for rising premiums.
Many employers are turning to customized health care solutions to maintain quality benefits for their workforce while finding opportunities to increase insurance premium savings.
With a customized health care solution, businesses can gain more control over the selection of their health care plan and can choose a policy that better fits their employees’ unique needs.
Customized health care plan designs can also result in significant savings for employers without the need to reduce employee benefits or employer contributions. This type of solution can be a win-win for both employers and employees in the long term.
Call the Experts at New City Insurance
New City Insurance is an experienced and trustworthy employee benefits consulting firm specializing in insurance, tech services, hr compliance, and benefits consulting. With help from New City, employers can implement a customized health plan solution that will help increase benefits that meet employees’ needs while maximizing insurance savings. To learn more, request a consultation online or call 888.210.2765.