Quick look: SMBs have felt the weight of increasing healthcare costs and most consider it a top challenge in their recruiting efforts. Though necessary to stay competitive, the affordability of healthcare benefits often causes a strain on already limited budgets. Since employees expect these as part of a complete compensation package, leaders must find a balance and are turning to PEO brokers for guidance.
Healthcare costs continue to rise, causing a rippling concern among employees and employers alike. The National Alliance’s Pulse of the Purchaser survey reports unmanageable healthcare costs hinder employer recruiting and retention efforts. 73% feel the impact more than salary and wage increases, and 82% report it impacts their ability to remain competitive. Small- and medium-sized businesses (SMBs) are especially affected as they work to handle the waves of inflation and avoid being taken under.
Though the importance of healthcare benefits is undisputed, Kaiser Family Foundation research reveals a 22% increase in the average family coverage premium over the last 5 years and a 55% increase over the last ten years. It’s no surprise 67% of CFOs say immediate action is needed to control these costs. But what’s the solution?
Attracting and retaining top talent is already a full-time effort, particularly in today’s ever-changing workforce. Job candidates are choosier when it comes to their employment options. A competitive salary alone isn’t as influential as it once was. Employees also want to work for a company which fully supports their physical and mental health. The allure of income can only go so far if they can’t afford to take care of their day-to-day well-being.
The first step is turning to industry experts for ways to move forward. Professional employer organization (PEO) brokers can connect their SMB clients with an HR partner who offers flexible solutions and can adapt to evolving challenges. It can help brokers better meet their clients’ needs and support their overall business objectives.
Where patients are feeling the most financial impact
Though there are multiple areas affecting the overall spike in healthcare costs, there are a few key factors making a significant impact. Per the National Alliance survey, 8 out of 10 employers feel it most through expensive prescription drug prices, high-cost claims, and the residual cost of low-value care.
Prescription drug prices
Americans spend more on prescription drugs per capita than any other country. Even after adjusting for inflation, the average drug prices for a year’s supply rose from $2,115 in 2008 to equaling over $180,000 in 2021. Though the greatest increases include cancer and rare disease therapies, the upward trend is crippling for all.
The gap between those who can and cannot afford healthcare continues to widen, regardless of the type of drug prescribed, which creates health inequities among employees. And when the value of health benefits declines, people will look for employment with companies with better options.
High-cost claims are also viewed as a primary factor driving expenses for employer-sponsored coverage. SMB employers are already battling with the market demand for salary increases to stay current with cost-of-living trends and competitive expectations.
Now, the increase in costs for medical care is testing how far spending can be stretched to keep and recruit quality talent. As a result, employers are considering strategies, such as managing complex cases and addressing specialty drug costs, as ways to mitigate the frequency of these expenses.
According to research by The Commonwealth Fund, low-value care refers to healthcare services offered to patients with little to no benefit and lead to unwarranted spending. Some examples include prescribing branded drugs when a generic identical is available, vitamin D screenings, and unnecessary imaging during the first few weeks of low back pain.
Implementing whole health care is a strategy many employers are focused on in the coming years. This approach helps to ensure employees optimize their medical benefits and get the personal care they need when they need it.
Finding answers through a PEO
With the increase in medical technology, as well as hospital stay and prescription drug pricing, rising healthcare costs are inevitable. Per the National Alliance survey, 46% of employers are considering tiered networks, 43% are considering the site of care, and 36% are implementing reference-based pricing in the next few years. Other cost-saving strategies include high-cost claim management through preventative care and expansion of mental health quality and access.
PEO brokers who offer their clients proactive solutions support their growth and strengthen relationships even amidst a downturn. It’s important to keep in mind, though, there isn’t a catch-all resolution. Mitigating costs long-term requires a deep understanding of a company’s unique challenges through a personalized approach.
A PEO solution through ExtensisHR helps to identify unused benefits, unnecessary spending, and gaps in care relevant to each company. This data informs where resources and spending is best allocated. A PEO also offers SMB clients premium benefits at cost-effective rates. This may include introducing healthcare plans, such as telehealth options and integrated benefits, to save on costs while still driving value for employees.
Though integrated plans don’t always offer the same benefits, it gives business leaders the information needed to make the best possible decision for their companies. Rather than applying a generic solution, each plan is tailored to a company’s specific needs and implements fresh strategies to support recruitment and retention.
Offering robust healthcare benefits helps to solidify a recruiting edge against competitors. When viewed as an employee investment, a greater value is realized rather than focusing on the expense alone. As a PEO broker, expanding resources to a team of HR experts is beneficial to all to cement both short- and long-term solutions.
Providing competitive healthcare benefits continues to be top of mind for business leaders across all industries. ExtensisHR can help your clients with benefits administration and creating strategies to minimize costs and maximize results. Contact our HR experts today.