Much like housing, groceries and gas,
The average cost employers pay for their employees' healthcare will jump by 6.5% next year, amounting to more than $13,800 per employee, according to professional services firm Aon. In 2022, these costs only increased by 3.7%, slightly less than the typical rate of 4%. As more Americans feel comfortable seeking testing and treatment in-person and address care they put off during the height of the pandemic, healthcare prices are bound to pick up again, says Ellen Kelsay, president and CEO of the Business Group on Health, a community of large employers dedicated to research and advocacy in the health benefits space.
"The pandemic meant there was a lot of deferred or missed care happening," says Kelsay. "We anticipated seeing a boomerang correct for the prior year, but not to the extent that we saw it materialize."
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The Business Group on Health surveyed 135 large employers who collectively cover more than 18 million workers in the U.S. and found that despite significant costs, most employers are prepared to cover 82% of employee healthcare — a 2% jump from the previous year. However, Kelsay predicts that throwing money at the problem will only take employers so far. They have to know where they need to expand their resources, she explains.
The Business Group on Health named cancer as the top driver of employer healthcare costs, a spot previously held by musculoskeletal conditions. In fact, 13% of employers surveyed say they have seen more late-stage cancers impacting their workforce, and 44% predict they will see an increase in cancer diagnoses in the future.
Again, Kelsay points out that delays in screenings, such as mammograms and prostate exams, left many Americans to unknowingly live with cancer. An estimated 64% of Americans deferred cancer screenings in 2021, according to the American Society of Clinical Oncology. And as a condition that can take months or years to treat, cancer is incredibly costly. The National Cancer Institute estimates the average cost of medical care and drugs is approximately $42,000 in the year following a cancer diagnosis.
"A lot of cancer treatments require immunotherapies, which are very expensive pharmaceuticals, as well as hospital stays and surgeries," says Kelsay. "Cancer is just a terribly expensive condition to have."
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Kelsay also encourages employers to reevaluate their pharmacy benefit partners and plan designs, especially as specialty drug prices increase at an alarming rate. The U.S. Department of Health and Human Services found that specialty drugs increased by 43% since 2016 and accounted for over 50% of total drug spend in 2021.
"This is not a new issue of concern, but one that has been growing for many years," says Kelsay. "Employers are looking for different [PBM] partners, transparent relationships and other contractual provisions to help stave off these trends."
If employers want to ensure their self-funded plans and benefits are heading in the right direction, Kelsay says employers should look closely at their workforce demographics in order to understand which populations are especially vulnerable and struggling to access care.
For example, Black people have the highest mortality rates for most cancers in the U.S., as a result of costs and discriminatory practices in the healthcare system. Employers should know whether every group in their workforce can access and afford their benefits to begin with, explains Kelsay. Healthcare equity will be key to designing plans that are not only better for employees, but cost-effective for employers, too.
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"Each employer needs to assess their workforce's needs," she says. "Their benefit plan designs need to be intentional and focused if they want to make a positive impact."
However, in order to make those impactful changes, employers need healthcare partners they can trust. Kelsay advises employers to consider if they truly have transparent relationships with their brokers, consultants and benefits partners.
"To have a meaningful and sustained impact on all these challenges, partnerships are paramount," says Kelsay. "It requires everyone working together and collaborating to address the problem."
