U.S. employers expect a sizable increase in healthcare costs in 2024, according to industry surveys. These surveys report that, on average, employers anticipate between a 6.5% and 8.5% increase in healthcare costs for 2024, which are higher than 2022 and 2023 projections. Recent findings from Willis Towers Watson’s (WTW) 2023 Best Practices in Healthcare Survey revealed that 69% of U.S. employers are focused on managing healthcare costs over the next three years. However, mental health remains a priority, with 63% of employers reporting that they’re focused on enhancing mental health and well-being programs for the foreseeable future. These numbers indicate that employers are trying to strike a balance between skyrocketing healthcare costs and employee needs. This article outlines the ways that small businesses plan to manage healthcare costs.
Many organizations are attempting to manage costs and improve affordability by finding healthcare plans and vendor efficiencies. In fact, 50% of employers are planning or considering implementing programs or using vendors to reduce costs in 2024/2025, and over one-third have already taken action. Additionally, 47% of organizations are planning or considering taking vendor or health plans out to bid to find a lower-cost provider.
At the point of care, employers are controlling costs by planning (or considering offering) a narrow network of higher-quality or lower-cost providers (24%), using centers of excellence within health plans (19%), eliminating specialty pharmacy services (16%) and offering plan options that restrict or eliminate out-of-network coverage for non-emergency services (3%) in the next two years. Employers are also focusing on reducing prescription drug care costs by planning or considering switching to biosimilars (27%), evaluating and addressing specialty drug costs and utilization that are paid through the medical benefit (26%), and having plan coverage exclusions or higher cost sharing for high-cost/low-value medications (14%).
Despite high costs, employers continue to prioritize mental health. More than half of employers have conducted or plan to conduct a mental health parity audit, and 48% have engaged or plan to engage with their employee resource groups to address population-specific mental health issues. Employers are also evaluating mental health networks from a diversity lens to ensure diverse representation and offering mental health days off.
Heightened healthcare costs are likely to continue impacting small businesses for the foreseeable future. Small businesses typically face the largest hikes in health care premiums and costs, especially when compared to large employers. This is likely the result of these organizations having less bargaining power with health insurers than large employers and often lacking dedicated HR professionals to manage their organizations’ employee benefits.
Looking ahead to 2024, many small businesses are focusing on impacts related to mental health, medications and health care delivery. To combat rising costs, small businesses are focusing on improving employee health outcomes, reducing unnecessary services and prioritizing preventive and primary care. Additionally, it may be advantageous for employers to focus on benefits education and employee communication to help employees understand their benefits and the best ways to utilize and maximize them.
Many employees are looking for ways to stretch their hard-earned dollars further, and employers can step in to provide that much-needed guidance. In turn, employer efforts focused on preventive and proactive health care can help curb health care costs. Successfully navigating rising healthcare costs and employees’ mental health needs can improve attraction and retention, boost employee health and well-being and provide employers with a competitive advantage. However, every organization is different. Small businesses must evaluate their organization’s unique needs to find the balance between providing critical mental health support and implementing cost-saving measures.
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