Unlike high rates of job creation and low rates of unemployment, both of which favor workers in today’s market, high rates of inflation favor no one. As we say in our promotions for Alera Group’s upcoming employee benefits webinar, Inflation-Proof Your Benefits, “When it comes to healthcare costs, inflation is a double-edged sword.” It cuts at both employers and employees.
Employers may not be able to totally negate inflation’s effects, but they can blunt them — through education, planning and careful implementation. Inflation-Proof Your Benefits is a start. Scheduled for Thursday, February 16, from noon-1 p.m. EST, the webinar is designed to:
- Explain the economic factors that make providing a valuable-yet-affordable employee benefits package such a challenge in today’s marketplace;
- Address the effects of inflation on employers and employees;
- Explore solutions for bending the cost curve, including through plan design.
By session’s end, you’ll have a stronger grasp of the challenges at hand and the resources available to manage them.
Medical Inflation and Overall Economic Inflation
While the struggle to get runaway healthcare costs under control has been going on for decades, inflation in the rest of the economy has not only caught but passed medical spending. This past November, the Kaiser Family Foundation (KFF) issued a release about a new report, “How does medical inflation compare to inflation in the rest of the economy?” Here’s the short answer provided in the KFF release:
“Medical care prices and overall health spending typically outpace growth in the rest of the economy. However, in recent months, prices for many consumer goods and services have increased faster than usual, with overall inflation at a four-decade high.
KFF’s analysis finds that in October 2022, “overall prices grew by 7.7% from the previous year, while prices for medical care increased by 5.0% … The relatively high rate of inflation seen in the rest of the economy may eventually translate to higher prices for medical care, potentially leading to higher health spending and steeper premium increases in the coming years.”
Employer and Employee Challenges
Looking at the more immediate future, Alera Group recently published its inaugural Employee Benefits Market Outlook, including this introduction to key takeaways found in the report: “Inflation, a changing regulatory landscape, the longtail impact of COVID-19 on employee mental health and wellbeing, and a changing workforce demographic are just a few of the factors driving increases and adding to the complexities projected for 2023.”
The rate of inflation in the rest of the economy has meant higher costs for employers on everything from goods to utilities to transportation to salaries and more. With demand for their products or services curbed by consumer concerns, they’re looking to save money somehow. And while employers grapple with inflationary factors, they also have a human resources problem: attracting and retaining employees at a time of relatively low unemployment outside the hard-hit tech sector.
Employees, meanwhile, are struggling to pay their bills and keep up with day-to-day expenses. For some, having to cover the cost of an illness or injury incurred by themself or a family member could prove untenable, especially if they’re living on the margins and paying a high out-of-pocket maximum for healthcare services. For those employees, a significant hike in their contribution to their employer-provided health plan could lead to a search for a new employer.
Solutions Begin with Population Health and Plan Design
How employers structure their group health plan can have a dramatic impact on employer cost and what employees pay in out-of-pocket expenses, as well as on the quality of care they receive. There are lots of good solutions. The key is finding the ones that best suit your organization and your employees.
Our webinar will provide insights on how to determine plan features such as deductibles, copays and out-of-pocket maximums. We’ll also touch on Health Reimbursement Arrangements (HRAs), Health Savings Accounts (HSAs) and the roles they can play in helping employees pay for healthcare.
And, of course, we’ll tackle the topic of prescription drugs.
As Axios recently reported, “A banner year for prescription drugs brings cost concerns,” with new medications and gene therapies offering new hope to people with serious illness — but at a steep price.
"These kinds of drugs, like cell and gene therapies or very expensive drugs that might cure sickle cell or very expensive drugs that could help with Alzheimer's, may force us as a country to rethink whether we pay for all drugs in the same way," Mark Miller, executive vice president of health care at Arnold Ventures, told Axios.
In fact, Alera Group’s employee benefits professionals are already thinking about that, recognizing that plan design — for all aspects of healthcare, including prescription drugs — requires a multi-faceted approach, specifically tailored to the needs and resources of an organization and its employees.
In keeping with Alera Group’s expertise in population health, we’ll address the impact on not only employer cost but also the impact and experience of care for members of your organization. Clinical management, for example, enables you to manage the high cost of claims and the long-term costs of care — by directing employees to higher quality care with better outcomes, or by re-directing patients to less-expensive but no-less-effective alternative means of treatment. Again, there are lots of options.
There is no miracle cure for inflation or its impact on employee benefits, but there are solutions to providing quality, affordable healthcare options that are good for your employees and your organization’s bottom line. We welcome you to join us on February 16 to learn more about them.
About the Author
Vice President and Senior Consulting Actuary
Harindra Sebastian has two decades of actuarial consulting experience, having served some of the largest and most complex clients in both the U.S. and Canada, across a wide range of industries. His prior roles have encompassed client relationship management, sales growth leadership, financial management, intellectual capital development and actuarial leadership. His experience spans group benefit plan strategy, pricing, financial management, program design and vendor management, including projects on due diligence for M&A deals, union negotiations, settlement of unfunded retiree benefit obligations, and guidance on cost reduction and talent attraction/retention through plan redesign. Harindra holds an Executive MBA from the Kellogg School of Management at Northwestern University and a Bachelor of Commerce (Honors) from the Asper School of Business at the University of Manitoba. He is a Fellow of the Society of Actuaries (FSA), a Fellow of the Canadian Institute of Actuaries (FCIA) and a Member of the American Academy of Actuaries (MAAA)