Health care costs in the United States have risen sharply over the past two decades. In fact, a study by the Journal of the American Medical Association found that U.S. health care spending increased by nearly $1 trillion from 1996 to 2015.

As the average premiums for single coverage and for family coverage continue to rise, employers shoulder the majority of those costs. So what does that mean for you?

When considering the problem of rising health insurance costs, it’s important to explore the reasons behind the cost increases. It’s also important to note that each organization will likely experience different cost drivers, but the following are among the most common across our region:

• Skyrocketing prescription costs — Prescription drug costs continue to represent an increasingly large portion of health care expenditures. The Centers for Medicare & Medicaid Services (CMS) projects that the annual expenditures for 2021 on prescription drugs will be $455 billion.
• Increase in chronic conditions — Approximately 133 million Americans live with one or more chronic diseases, which translates into an increased cost for employers. As a nation, 86% of our health care dollars go to treatment of chronic diseases.
• Increased usage — A number of factors such as improvements in medical technology, the influence of managed care, elevated consumer awareness and demand, and a boost in the number of practicing physicians caused health services to rise significantly.
• Aging population —According to the U.S. Census Bureau, the number of Americans ages 65 and older is expected to nearly double by 2025, and the elderly population (80 and older) will increase by 80%.
• Low health literacy — It is estimated that low health literacy costs the United States $106 billion to $238 billion annually and accounts for 7% to 17% of all personal health care expenditures. The 2018 Broker Services Survey found that 41% of survey respondents believe helping employees become better consumers of health care was a top benefits challenge.

How can employers address rising costs?

Employers are struggling to contain accelerating health plan costs. After trying to absorb most of the costs because of hiring and retention issues, many firms are attacking the root causes of rising costs with sustained, systemic changes. With the growing epidemic of poor health and the uncertain overall impact of health care reform, many employers are looking at both short- and long-term strategies to manage costs, which include making plan design changes, focusing on employee well-being, education, and implementing additional benefits offerings.

As costs continue to climb, your organization needs to take action. Western Growers Insurance Services (WGIS) will guide your organization to health care cost-mitigation strategies.

For more information, contact Eric Trost, vice president of employee benefits at Western Growers Insurance Services, at (949) 885-2211 or [email protected].