Revolutionizing Employee Benefits: HR Strategies To Tackle Rising Healthcare Costs In 2024

Future-proofing employee benefits

Healthcare benefits costs continue to be a fiscal pain in search of a solution. Their inexorable climb shows no signs of slowing in 2024, but past tactics to rein them in (like shifting some of the burden onto employees) are not feasible in a tight labor market.
 

Total costs escalated an average of 7% in 2023, and another 7% jump is expected in 2024. The pattern has repeated itself year after year, bumping the average health insurance premium up by 54% over the last 10 years. Much of these increases are passed to employees.
 
As chronic health conditions, catastrophic claims, and rising specialty drug costs take their toll, human resources (HR) leaders are focusing on ways to make their benefits not just more affordable but more effective in recruiting and retaining talent. It’s a holy grail that is attainable.

Some important strategies to put into play in the new year follow.

Driving Better with Data – and Tech, for that Matter

Benefits analytics – the coalescence of demographic data, financial information, and claims utilization – are no longer the sole province of big business. The passage of the Consolidated Appropriations Act (CAA) grants fully insured small and middle-market employers full access to their benefits data, including pharmaceutical use and cost.
 
Gaining actionable insights from the data is the challenge. Through analytics, patterns in claims, conditions, and care can be identified that reveal larger truths about the cost of a plan. Analytics can also identify clinical patterns and administrative errors that can save thousands of dollars — or even hundreds of thousands — on a single claim.
 
But that power hasn’t yet been fully realized. While 68% of respondents to HUB’s 2024 Outlook Executive Survey said data analytics plays a role in health plan management, they have only used analytics to cut costs or analyze claims trends.
 
It takes technology to drive not just analytics but to contribute to the efficient and compliant management of HR, from recruiting, payroll, benefits administration, absence management, and more. Accordingly, technological advances stand to have a big impact on HR, and in 2024, attention will increasingly turn to artificial intelligence (AI). AI has enormous potential to improve recruiting and benefits compliance as well as benefits strategies. However, such nascent technologies can raise concerns about their potential to distance humans from the impact of the process. When HR tech and the actual benefits operation are siloed, the results may be suboptimal.

Captives Remove Volatility from Self-Insurance Game

The hard insurance market, combined with the economic aftereffects of the Covid-19 pandemic, has led to unprecedented growth in captive adoption. Both health insurance and voluntary benefits captives pose risk management advantages to employers that will continue their allure into the new year.
 
Through health insurance captives, employers can both cut costs and improve care. Voluntary benefits captives extend savings that can fund new plan designs or reduce employee premiums.
 
Through a stop loss captive, for example, one HUB client cut medical benefits and medication costs by $2.5 million and $1 million, respectively, in just the first six months. Longer-term health expenses were reduced by about 40% and as much as 80% on some drugs.

Personalizing Benefits to Boost Employee Engagement

The growing focus on holistic HR strategies that bolster a quality employee experience will also gain more traction in 2024. The key is to boost engagement to remedy employee turnover, given a persistent imbalance between job openings (9.6 million in September 2023) and millions fewer people willing, able, and qualified to fill them.
 
A package of personalized benefits that meet individual workers where they are in their professional and personal lives is an important tool for improving engagement. Only 34% of workers feel engaged with their jobs; 16% are actively disengaged. Personalized benefits advance the kind of employee experience that builds a positive, supportive business culture. But only 40% of the executives responding to HUB’s outlook survey offer them.
 
One mid-sized HUB client in financial services saw a payoff in adopting this perspective after HUB’s Workforce Persona Analysis highlighted noticeable gaps between benefits and needs. They spanned younger people starting families to middle-aged and older workers struggling with chronic health issues and shared struggles with finances.
 
The company enhanced the plan to fill the gaps with fertility benefits, free access to weight management programs, and improved financial well-being benefits. The result: reduced turnover and increased employee satisfaction and engagement.

Toward Meeting 2024 Goals

From optimizing technology and making the most of the wealth of available benefits data to creating an environment that advances employee engagement and recruitment and retention goals, employers and their HR leaders need to be prepared to meet the challenges. The environment will be no less challenging in 2024. Qualified brokers will be ready to help organizations with the right solutions to come out ahead.

Authors’ Bios

Jeff Faber is the Chief Strategy Officer for global insurance brokerage HUB International’s Employee Benefits Practice. He is responsible for the development and execution of cutting-edge cost-containment, risk-reduction, and employment-enhancing initiatives.

Linda Keller is the National COO and Employee Benefits Practice Leader for HUB International. She has nearly thirty years of experience in the design and implementation of strategic health and benefits programs. She is a certified Healthcare Reform Specialist by the Healthcare Reform Center & Policy Institute. She also earned a Global Benefits Associate certification from the International Foundation of Employee Benefit Plans.