Healthcare Costs Are Climbing. But Why Are Some Employers Getting Hit Harder Than Others?
If it feels like healthcare costs just keep going up, you're not imagining things.
Over the last decade, employers, employees and families have all felt the pressure of rising healthcare expenses. Premiums are climbing, deductibles are getting higher, and out-of-pocket costs continue to put a strain on household budgets.
And for employers trying to provide meaningful benefits while managing their bottom line, another renewal season can bring another difficult conversation.
But here's something we're seeing in the health insurance marketplace right now that deserves a closer look: not every employer is experiencing rising healthcare costs in the same way.
In fact, the difference can be pretty significant.
WATCH: Why Your Renewal Increase Might Look Different Than Other Employers
The Rising Cost of Healthcare Isn't Affecting Everyone Equally
As we work through another busy renewal season at Caravus, we're seeing dramatically different renewal increases depending on how employers finance their health plans.
Here's a look at the average increases we're seeing across our client population:
Level funded plans: Nearly 26%
Fully insured plans: Approximately 16%
Self funded plans: Just under 9%
Let those numbers sink in for a moment.
We're talking about employers operating in the same healthcare marketplace, accessing many of the same hospitals, physicians and prescription medications, yet facing very different financial outcomes.
So, if healthcare costs are rising across the board, why are some employers seeing increases that are nearly three times as high as others?
It's a question worth asking.
What's Driving Such Different Renewal Increases?
There's no single explanation for these differences, and it's important to recognize that these funding arrangements aren't structured the same way.
Each approach distributes and prices risk differently. The demographics, claims experience and overall makeup of the employee populations within each group can also influence renewal outcomes.
But when the gap between renewal increases is this wide, it raises some bigger questions:
Healthcare utilization: Are differences in how employees access and use healthcare contributing to these increases?
Risk pooling: How does the way risk is distributed across different funding arrangements affect what employers ultimately pay?
Employee population: How much do workforce demographics and individual claims experiences influence renewal pricing?
Funding strategy: Does the way an employer finances its health plan play a bigger role in managing rising healthcare costs than many realize?
The answer is likely a combination of factors. But understanding those factors is an important part of understanding why healthcare costs continue to rise and why the impact looks different from one employer to the next.
Is Your Health Plan Funding Strategy Still the Right Fit?
When renewal increases keep coming, it's easy to focus on the percentage sitting in front of you. But there's a bigger conversation employers should be having.
Is your current funding arrangement still the best fit for your organization?
The strategy that made sense a few years ago may not necessarily make sense today. An employer's size, financial goals, risk tolerance, workforce demographics and claims experience all play a role in determining which approach may be most appropriate.
That doesn't mean one funding arrangement is automatically better than another. It means employers should understand their options and take a closer look at what's actually driving their healthcare spend.
Because when healthcare costs continue to climb, simply accepting another renewal increase shouldn't be the only option on the table.
The Conversation Around Healthcare Costs Isn't Over
The rising cost of healthcare isn't going away, and employers are right to be asking questions.
At Caravus, we're taking a closer look at why renewal outcomes vary so dramatically across the marketplace and what those differences can tell us about the future of employer-sponsored healthcare.
In upcoming conversations, we'll explore the factors behind these increases, including healthcare utilization, risk pooling and the way health plans are financed.
Because understanding how much your healthcare costs are increasing is one thing. Understanding why is where the real conversation begins.