Rising Health Care Costs: What Employers Need to Know and How to Respond

Health care costs

The cost of health care in the United States continues to rise, creating significant challenges for both employees and employers. In 2022, health care expenditures accounted for 17.3% of the U.S. gross domestic product (GDP), and projections indicate that this will increase to 19.7% by 2032. These escalating costs put financial strain on individuals and organizations, requiring proactive strategies to manage expenses while ensuring employees have access to quality care.

Employee Concerns: The Growing Financial Burden of Health Care

1. Rising Insurance Premiums

  • Nearly 50% of individuals worry about affording their monthly health insurance costs.
  • In 2023, the average annual health insurance premium rose by 7%, reaching $8,435 for single coverage and $23,968 for family coverage.
  • Many employees struggle to absorb these rising costs, affecting their financial stability and overall well-being.

2. Delayed Medical Care Due to Cost Concerns

  • 25% of insured individuals and 61% of uninsured individuals delay or avoid seeking medical care due to cost.
  • Postponing treatment can lead to more severe health conditions and higher long-term medical expenses, creating financial and productivity challenges for both employees and employers.
  • Many individuals are forced to deplete retirement savings or rely on credit card debt to pay for health care costs.

3. The Wage and Health Care Cost Disparity

  • Since 2009, health care costs have risen at a faster rate than wages, making it increasingly difficult for employees to afford care.
  • Although recent salary increases have helped, many workers still struggle with accumulated medical debt and untreated chronic conditions.

Employer Concerns: Managing Costs While Supporting Employees

1. Rising Health Benefit Costs

  • Employers anticipate a 5.4% increase in health benefit costs per employee in 2024 and total costs could rise by 10% by 2026.
  • Employers are seeking cost-effective strategies to maintain competitive health benefits while managing their bottom line.

2. Regulatory Compliance Challenges

  • Depending on their size, employers must comply with federal regulations such as the Affordable Care Act (ACA), which mandates coverage for services like hospital visits, prescription drugs, and mental health care.
  • Navigating state and federal compliance requirements adds complexity to benefits management.

3. Balancing Cost Control and Employee Satisfaction

  • Employers must manage rising health care expenses without reducing benefits or shifting excessive costs to employees.
  • Many organizations are implementing cost-sharing measures, wellness programs, and alternative plan designs to maintain benefits while controlling costs.

Key Factors Driving Rising Health Care Costs

1. An Aging Population

  • Longer life expectancy and medical advancements mean more individuals are living into old age, requiring increased health care services.
  • 95% of adults over 65 have at least one chronic condition, and 80% have two or more, contributing to higher overall health care spending.

2. The Prevalence of Chronic Diseases

  • Chronic illnesses such as diabetes, heart disease, asthma, and certain cancers are increasing across all age groups.
  • Many individuals avoid medical care due to cost concerns, leading to worse health outcomes and higher expenses over time.

3. Generational Health Care Needs

Each generation faces unique health care challenges that impact their costs and coverage needs:

Baby Boomers (1946-1965)

  • Prioritize controlling health care spending as they transition into Medicare eligibility.
  • 71% say health insurance is a top concern, and many look for wellness perks to maintain their health.
  • 27% of baby boomers have no retirement savings, increasing reliance on employer-sponsored benefits.

Generation X (1966-1980)

  • Often responsible for health care costs for children, elderly parents, and themselves.
  • 60% cite financial stability as a major stressor, making affordability a key issue.

Millennials (1981-1996)

  • Carry high student loan debt, making it harder to afford medical insurance and out-of-pocket costs.
  • Generally have fewer chronic conditions, but mental health concerns are rising among this group.

Generation Z (1997-2012)

  • 1.4 times more likely to experience financial stress than older generations.
  • Mental health issues are a top concern, with 45% reporting high stress and burnout at work.

4. Inflation and Economic Pressures

  • Rising inflation has increased costs across all industries, including health care.
  • 77% of Americans worry about money, and many are forced to choose between medical care, rent, and food.

5. The Impact of the COVID-19 Pandemic

  • Emergency response costs, supply chain disruptions, and delayed elective procedures led to significant health care cost increases.
  • The growth of telehealth services has changed how care is delivered, introducing new cost structures for employers.

Strategies for Employers to Manage Rising Health Care Costs

To balance cost management and employee support, employers should consider:

✅ Implementing Wellness Programs – Encourage preventive care to reduce long-term medical costs.
✅ Exploring Alternative Health Plans – Consider high-deductible health plans (HDHPs) with HSAs to control premiums.
✅ Enhancing Employee Education – Help employees understand benefit options and cost-effective health care choices.
✅ Optimizing Pharmacy Benefits – Negotiate with pharmacy benefit managers (PBMs) to control prescription drug costs.
✅ Leveraging Data Analytics – Use claims data to identify cost drivers and develop targeted solutions.
✅ Partnering with Benefits Consultants – Work with experts to design strategic, cost-effective health plans.

How Atria Helps Employers Navigate Rising Health Care Costs

At Atria, we specialize in developing innovative health care solutions that balance cost control, compliance, and employee satisfaction.

Our Expertise Includes:

✔ Health Plan Optimization – Identifying cost-saving opportunities without sacrificing quality.
✔ Regulatory Compliance Guidance – Ensuring your organization meets ACA and HIPAA requirements.
✔ Employee Benefits Strategy – Customizing solutions to improve retention and engagement.
✔ Pharmacy Benefit Management – Controlling prescription drug spending through cost-effective strategies.
✔ Wellness and Prevention Programs – Reducing costs by promoting healthier employee lifestyles.

With Atria, compliance isn’t just about meeting legal requirements—it’s about building a sustainable benefits strategy that supports both employers and employees.

Final Takeaways: What Employers Need to Do

📌 Review health care cost trends and assess how they impact your business.
📌 Explore alternative plan designs that balance cost savings and employee well-being.
📌 Educate employees on cost-effective health care decisions to help them manage expenses.
📌 Leverage expert guidance to optimize benefits offerings and control spending.

🔹 Need help managing rising health care costs?
🔹 Contact Atria today to develop a benefits strategy that aligns with your goals.