The year 2024 brings with it a significant challenge for both businesses and their employees – a steep rise in health insurance costs. Major benefits consulting firms Mercer and Willis Towers Watson have projected an approximate 6.5% surge in employer coverage expenses. In this blog post, we’ll delve into the factors driving this increase and explore whether these costs will be passed down to employees.
Factors Driving Rising Health Insurance Costs
Medical inflation is a primary contributor to rising health insurance costs. This refers to the general increase in healthcare costs over time, which includes factors like the cost of medical equipment, pharmaceuticals, and healthcare services.
While medical technology advancements have undoubtedly improved patient care, they often come at a significant cost. Cutting-edge treatments and therapies can be expensive, contributing to the overall increase in healthcare expenses.
As the population ages, the demand for healthcare services increases. Older individuals typically require more frequent and comprehensive medical care, which can drive up costs for both employers and insurers.
Chronic Disease Management
The prevalence of chronic diseases is on the rise. Managing conditions like diabetes, heart disease, and obesity requires ongoing medical attention, leading to higher healthcare expenses.
Prescription Drug Costs
The cost of prescription medications has been steadily increasing, putting pressure on both insurers and employers to cover these expenses. Specialty drugs, in particular, can be exorbitantly priced.
Shifts in healthcare policy and regulations can have a significant impact on costs. Changes in compliance requirements, as well as evolving healthcare laws, may necessitate adjustments in insurance premiums.
Will Health Insurance Costs be Passed Onto Employees?
The question of whether these rising health insurance costs will be passed on to employees is a critical concern. Employers have several options to consider:
Absorbing the Costs
Some employers may choose to absorb the increased expenses themselves, viewing it as an investment in the well-being and satisfaction of their workforce. However, this approach may not be sustainable in the long term.
Another approach is to share the burden of increased premiums with employees. This can be achieved through adjustments to contributions, co-pays, deductibles, and other cost-sharing mechanisms.
Exploring Alternative Insurance Models
Employers might explore alternative insurance models, such as high-deductible health plans paired with health savings accounts (HSAs). These can help control costs while empowering employees to take charge of their healthcare expenses.
Investing in wellness programs and initiatives can help prevent or manage chronic conditions, potentially reducing long-term healthcare costs for both employers and employees.
The surge in health insurance costs for 2024 presents a significant challenge for businesses and their employees. Understanding the factors driving these increases is crucial for making informed decisions about how to navigate this landscape. While passing costs onto employees is one option, employers have various strategies at their disposal to mitigate the impact and ensure that healthcare remains accessible and affordable for all parties involved.
Human Resources doesn’t have to be overwhelming. Partnering with HRO Resources, the HR experts, will help you navigate the rising health insurance costs to make the best decision for your organization and your employees.
Whether you are a startup or a growing company with 50+ employees, HRO has the tools you need so you can focus on guiding your team to success.