Over the past several years, healthcare costs have been rising consistently. In 2023, the health benefits costs are expected to increase by 5.4% (compared to a 3.2% hike in 2022). Instead of increasing gradually, these costs tend to rise at steep jumps and impact the HR budget significantly.
Adjusting to the increasing healthcare costs can be problematic, especially for small businesses. However, medium-sized companies and enterprises are also feeling the effect. Regardless of size, companies constantly look for ways to save on employee health benefits.
Let's take a closer look at the available options.
Why Healthcare Costs Keep Going Up
Healthcare costs are constantly increasing for a variety of reasons, including:
- Aging population – by 2030, 21% of the entire American population will be 65 or older. By 2060, seniors will make up 25% of the population. That will boost Medicare enrollment and increase the number of complex chronic conditions that require costly treatment.
- Medical advancement – as medicine becomes more complex, its costs skyrocket. While new technologies and medications extend people's lives and keep them healthier longer, they require bigger investments. The burden falls on the companies' shoulders.
- Chronic diseases – the recent pandemic caused a significant rise in people who need medical attention. Meanwhile, the overall American population is becoming less healthy. By 2030, more than half of people in the U.S. will have a chronic disease. Since chronic disease treatment is expensive, health insurance providers increase premiums.
- Rising medication costs – over the past six years, prescription drug prices went up by over 30%. The costs keep rising with continued research and breakthroughs, making healthcare increasingly expensive annually.
- Expensive healthcare services – the cost of healthcare services is rising every year. The main factors contributing to the increase are rising doctors' salaries and high administrative costs.
- Defense medicine – since many doctors worry about malpractice lawsuits, they prescribe unnecessary tests or treatments. Defense medicine costs in the U.S.A. exceed $46 billion annually.
As the demand for health services rises, so does the supply. As healthcare providers inflate the price tags, insurance companies increase costs accordingly.
With the current trend of an aging population and the increase of chronic diseases, healthcare costs will likely continue rising for at least ten more years.
How PEOs Help Stabilize Healthcare Costs
Rising healthcare costs increase health insurance premiums, rendering high-quality benefits inaccessible to small businesses. SMBs often have to choose between better health benefits and other advantages for their employees, such as 401 (k) plans or voluntary benefits.
That makes it harder for smaller companies to become employers of choice and retain top talent. Professional Employer Organizations (PEOs) can help stabilize healthcare costs for their clients. By becoming a co-employer, a PEO groups all client companies in one large pool and takes advantage of group healthcare plans. Many clients and their employees allow a PEO to negotiate better rates with insurance companies.
Partnering with a PEO helps businesses take advantage of high-level premiums at lower prices. That is a significant benefit for companies with small budgets because the rising healthcare costs affect them at a much slower rate.
Meanwhile, PEOs constantly look for new ways to help their clients take advantage of lower premiums. They negotiate with insurance providers and explore all available options.
Support Your Staff with PEO Healthcare
Professional employer organizations focus on providing their client companies access to the most advanced benefits at reasonable prices. By partnering with a PEO, you have the opportunity to offer existing employees and top-talent candidates high-quality healthcare, dental, and vision coverage at an affordable rate.
Enhanced benefits can help improve employee satisfaction, reduce churn, streamline productivity, and boost workplace morale. All these can contribute to improving the company's bottom line.
In addition to arranging accessible benefits, a PEO can take care of a wide variety of administrative tasks, including:
- Payroll processing
- Payroll taxes
- Benefits administration
- Onboarding and training
Besides saving your company money, a PEO can take the administrative burden off your internal HR team's shoulders and allow them to focus on pressing HR tasks. Out of all HR outsourcing options, a PEO is the only one that provides access to better benefits while leaving you complete control over HR decisions.
Rising Healthcare Costs Shouldn't Hold You Back
While healthcare costs aren't likely to stop increasing in the nearest future, they shouldn't prevent you from offering high-quality benefits to your employees.
Working with a PEO allows you to provide health benefits to your workforce without hurting your budget. Access to lower-cost premiums arranged by the PEO lets you gradually adjust to rising healthcare costs.
