(Newswire.net — October 7, 2016) — According to financial analysis projections, healthcare costs are supposed to grow 6.5 percent through 2017. In some areas of the country, there may be rises as high as 35 percent. This rate of growth is fairly stable, but it’s still considerably higher than overall inflation, which is a major burden on both employers and insurers.
Impact on Businesses
While large corporations may not see the increase as a big obstacle, smaller and mid-size businesses that are trying to keep their labor costs down are struggling to fit the inflation into their business plans. They’ll need to adjust their healthcare coverage in order to lower their costs while still meeting government regulations.
“The good news is that health care cost trends are staying at a more moderate level. They’re not the double digit trend that we had years ago,” says Barbara Gniewek, a principal in PwC’s Global Human Resource Services group. “The bad news is health care does cost employers a lot of money and the idea that they are just going to absorb a 6.5% increase when CPI is at a much lower rate is unlikely, so they will continue to cost shift.”
Small to mid-size businesses are struggling to shoulder the cost, which will probably result in them offering less than adequate health insurance for their employees.
Employee Insurance Plans Suffer as Businesses Struggle
Unfortunately, this rise in healthcare is prompting many employers to find loopholes in the current system in order to employ quality workers without offering insurance they can’t afford. They’ll hire part-time workers or independent contractors to fulfill their labor requirements so that insurance isn’t required.
Another common problem is poor quality health insurance for employees. According to the PwC’s report, a quarter of employers have resorted to offering high-deductible health plans because they’re cheaper. Another 39 percent say that their high deductible health plan is the only strategy they’ll be able to afford in the next three years.
There’s also the idea of a defined contribution strategy where the employer will offer a yearly sum to pay for health insurance, but if the plan chosen by the employee is higher than that, it’s the employee’s responsibility to cover the remainder. For employees who are single or have a spouse with no children, this plan may not be a problem, but for those with families and children, the costs can be excessive and impossible for employees to cover on their own.
The Causes and Results of Rising Rates
The primary reason for rising health costs is actually the consumption of healthcare and the price for services and drugs. As these costs rise, insurance skyrockets as a direct result.
PwC research shows that specialty pharmacy drugs, high-cost claimants, and specific diseases or conditions that have been discovered recently are the three top reasons why healthcare continues to rise. Overall medical inflation is the fourth leading cause of rising insurance.
There have been many movements to bring down costs that are making it difficult for employers to keep their employees insured. The goal here is to drive down costs of pharmaceuticals and medical care in order to reduce insurance costs around the board. These initiatives include generating off-brands for specialty drugs and proposals to make the cost of healthcare drop.
The digital world is helping with this. As offices implement electronic healthcare records (EHR) and other forms of digital recording, it reduces operating costs within healthcare organizations. Digital interconnectedness is also helping to spread the word about the injustices in rising costs.
As more people become informed and strive to make a change, there could be improvements to the world of insurance and healthcare.