As you know all too well, health care costs are rising. KFF says employers’ premium increases are averaging between six and 10 percent this year. A few businesses have experienced bigger hikes – as much as 32%. Looking ahead, PwC said this month that escalating medical costs will increase in the employer market by nine percent next year. The expected 2027 increase in the individual market is 8.5%.
Looking at historical numbers can be almost overwhelming. Before some of us may have been born – back in 1970 – health spending in the U.S. was $74.1 billion. Twenty years later, it had reached $253.2 billion. In 2000, it exceeded $1.37 trillion. It jumped to $5.28 trillion by 2024.
With all of these numbers in mind, it is not surprising your clients may be asking, “What can I do to offset my group health premium increase? Should I consider changes to my employees’ benefits to save money? Or should I look at increasing my cost share with employees?”
These are all excellent questions. Are you prepared with answers for your clients?
Three Ways to Respond
There are many strategies employers can consider to combat increasing costs. Here’s a look at three.
- Plan restructuring: Rising prescription drug costs are a big part of health care spending. You may want to discuss how changes in Rx benefits could affect premiums, deductibles, and cost sharing. Or consider a plan switch. Would a move to a level-funded plan (rather than a traditional, fully insured plan) deliver savings. It could depend on the group’s demographics and claims history. However, moving to level-funded or self-funded plans also poses risk. A better option might be a Defined Contribution health plan. Your clients select the amount they want to contribute to employees’ premiums. With the CaliforniaChoice plan from CHOICE Administration, clients choose 50% to 100% of the premium for the tier, health plan, benefit level, or lowest-cost plan. Employees then apply the employer’s contribution to the health benefits they prefer. And employees can choose from HMO, PPO, and HSA-compatible coverage from seven different health plans. (Coverage availability varies by where employees live.) If your client wants to stay with a fully insured plan, your partnership with Word & Brown means you have access to a diverse roster of carriers doing business in California and Nevada. Ask us to run comparison quotes, so your clients can see their options side by side.
- Professional Employer Organizations: Small and mid-sized businesses can reduce administrative tasks and shift benefits responsibilities by moving to a PEO. We have the expertise to evaluate whether a PEO is good fit. Or, if your client has a PEO and isn’t happy, we can help with that, too.
- Add a High-Definition Health Plan (HDHP) and Health Savings Account (HSA): Offering employees one or more HDHPs can reduce costs and unlock access to a tax-advantaged HSA. This combo is ideal for those wanting to minimize premium, while building a cash reserve for the future. Plus, HSAs offer triple tax advantages. Contributions are 100% tax deductible. Funds grow and earn interest, tax free. Withdrawals are tax-free when used for qualifying medical expenses. Better still, HSAs roll over year after year. Yor clients and their employees can build a future fund for health care expenses later in life.
Shop & Compare With Our Help
Be the trusted advisor your clients need by offering them valuable counsel about how to deal with increasing costs. We can help! Whatever your market and group size focus, the teams at W&B are here for you. We have the portfolio and tech – including our updated WBQuote platform – to help you do your job better. Contact your W&B rep to learn more.
If you are not already working with us, it’s easy to get started. Register online today. Or reach out to my colleague, Jim Pippins, W&B’s Senior Director of Broker Success.
