US employers keep passing rising healthcare costs to workers. There are better options
Choosing a healthcare plan can be extremely complicated, but it’s necessary to attract and retain good workers Again, healthcare costs are going up. According to a recent study from Mercer, total health benefit cost per employee in 2027 is expected to rise 8.2% – after employers’ planned cost-reduction measures (without action, employers told Mercer their existing plans would rise about 11%).…
In a recent study by Mercer, it is projected that total health benefit costs per employee will rise by 8.2% in 2027 – a significant increase from what employers had planned. If no action is taken, this would mark the largest rise since 2003. Employers have responded by increasing the portion of healthcare costs paid by employees, with the Wall Street Journal reporting that this rise has been even more rapid than the cost increase itself.
Companies recognize the financial impact of rising healthcare costs, but is it the best solution to shift these expenses to workers' paychecks? Many, particularly smaller businesses where 44% do not offer health benefits, have alternative options.
One such option is an Individual Coverage Health Reimbursement Arrangement (ICHRA), which allows employers to reimburse employees for their own healthcare coverage without having to purchase group health insurance. This approach gained popularity among companies with fewer than 100 employees, with adoption rates growing between 73% and 128%.
Another cost-saving method involves Health Savings Accounts (HSAs), which can be paired with high-deductible group insurance plans. Employees can contribute pre-tax dollars to these accounts to cover various healthcare expenses, including deductibles, copays, prescription drugs, and dental or vision costs not covered by insurance.
This arrangement benefits employees due to the tax-free growth of savings and the ability to keep the funds if they change jobs.
Companies are also exploring self-insurance as a cost-cutting strategy. By assuming responsibility for a certain amount of employee healthcare expenses, employers can negotiate rates with local healthcare providers and pharmacies. This approach encourages companies to focus on employee out-of-pocket expenses and negotiate better rates.
Online pharmaceutical providers, like Amazon, are offering competitive discounts for corporate plans. While setting up these alternatives may require time and effort, they present an opportunity for employers to manage costs and enhance their attractiveness to potential employees in a competitive labor market.
Written by urgent.news from Guardian Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
