The largest increase in U.S. employer healthcare spend may be coming in 2024, according to an article from Reuters. Citing multiple industry studies, average costs paid by employers are set to increase over 8 percent with medical inflation, demand for weight loss drugs and availability of other costly therapies among the factors driving these costs.
In this article, we’ll take a look at some of the trends in healthcare spending that are driving these rising costs, as well as ways to mitigate them.
Mental Health
41% of U.S. adults experienced high levels of psychological distress at some point during the pandemic, according to four Pew Research Center surveys conducted between March 2020 and September 2022.
Nine out of every 10 adults said they believe there’s a mental health crisis in the United States, according to a CNN report from last year.
And an NPR report from last week reported that roughly two-thirds of Americans with a diagnosed mental health condition were unable to access treatment in 2021, even though they had health insurance.
It is essential that we continue to address mental health by increasing access to treatment, promoting awareness and supporting initiatives that prioritize mental wellbeing. Employers are expected to continue expanding access to mental health support and services while reducing barriers to care.
Pharmacy Spending
An uptick in speciality drugs, especially those meant to treat diabetes and support weight loss, is the lead factor in growing pharmacy costs. GLP-1s (glucagon-like peptide-1 receptor agonists) have had a significant impact on healthcare costs for many U.S. employers, a trend which is sure to continue in 2024. These drugs, designed for patients with type 2 diabetes, improve blood sugar control by stimulating the body to produce insulin after eating.
They can also lead to weight loss. As GLP-1s become approved as weight loss medications without a Type-2 diabetes requirement, employers should be actively considering how they will approach these prescription drugs.
According to Truveris, the size of the GLP-1 market is expected to balloon from $22 billion to $72 billion between 2022 and 2032. A Reuters article estimated the impact of these drugs: pharmacy benefit costs increased 8.4% year-over-year in 2023, compared to a much smaller 6.4% increase the year before.
Most employers are looking for more transparency when it comes to pharmacy benefit management (PBM) pricing. According to The Business Group on Health’s survey, 92% of employers are concerned about high-cost drugs in the pipeline, and 73% say finding more transparency when working with pharmacy benefits managers is a priority.
Health Care Delivery
The popularity of on-site clinics and access to virtual care is likely to be another continuing trend, which can also be a cost saver for employers.
By reducing the number of trips to urgent care facilities or even visits to a primary care physician, employers can reduce costs. The emphasis on preventative care and removing barriers to healthcare through on-site clinics and virtual health platforms can result in earlier intervention and prevention of chronic conditions. By encouraging regular screenings, vaccinations and wellbeing programs, these interventions can help identify health issues at an early stage when they are easier and less costly to treat.
It should be noted that while these practices became much more common in the days post-pandemic, it seems these practices may be leveling off in 2024. According to The Business Group on Health, roughly half of employers (53%) offered on-site clinics in 2023, with approximately the same figure is expected to do so in 2024. Because many employers have migrated to a hybrid or remote work environment, the need for health services at the workplace is no longer growing.
Final Thoughts
Rising costs are likely to continue to impact employers into the new year. However, by focusing on improving health outcomes and increasing access to mental health support and preventative care, employers can mitigate some of these costs. Work with your Gregory & Appel benefits consultants to devise strategies to offer great care, minimize increasing costs and provide benefits that attract and retain talent within your organization.