WCI, Inc
May 17, 2024

Health costs worry CFOs

Over two-thirds of chief financial officers (CFOs) view health care costs as a significant (46 percent) or very significant concern (21 percent) compared to other operating expenses, according to recent research from Mercer. The 2024 CFO Perspective on Health report noted that this is understandable given that health benefit cost growth is exceeding general inflation and the annual average health benefit cost per employee is approaching $16,000. To keep health care costs sustainable, about half of CFOs believe that their organization’s health care cost trend needs to rise at no more than the rate of general inflation. However, Mercer noted that for the past two decades, average annual health benefit cost increases have typically run 1 percent to 2 percent above this level.

When asked about specific drivers of health care costs, CFOs are most concerned about high-cost claimants (those generating claims of more than $100,000 but less than $1 million). According to Mercer, claims of this size have become more common in recent years and contribute most to high trends and cost volatility.

In addition, over one-third of CFOs are not confident that long term health care cost management strategies that require investment are saving money. Specifically, Mercer found that 6 percent of CFOs are very confident in the return on investment for their organization’s health care cost management, 39 percent are reasonably confident, and 36 percent are not confident. Nearly 20 percent of CFOs said they do not have enough information to say either way.

Self-funded plans. While 70 percent of CFOs with self-funded plans believe they are receiving the necessary information to monitor health program costs effectively, 30 percent do not believe they are receiving it or are unsure. In addition, nearly two-fifths of CFOs said business results would be materially impacted if their plan’s actual experience is over budget by 2 percent of 4 percent.

Fully insured plans. Thirty-three percent of respondents with fully insured plans are considering converting to a different funding mechanism. Most companies with fully insured plans like them because of the cost predictability, and believe they do not have the resources to manage a self-funded plan.

SOURCE: https://www.mercer.com/assets/us/en_us/shared-assets/local/attachments/pdf-2024-us-the-cfo-perspective-on-health-survey-results.pdf

From WCI's HR Answers Now ©2024 CCH Incorporated and its affiliates. All rights reserved.

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