According to global management consulting firm, McKinsey and Company:
The cost of healthcare is skyrocketing. In fact, U.S. health expenditures are expected to reach $6.8 trillion by 2030. According to global management consulting firm, McKinsey and Company:
Employers:
- could face 9-10% increases through 2026 due to inflation
- in large workforce industries, such as: retail, manufacturing, and food services may experience a 16-19% loss in profits by 2025 as a result of rising health plan costs
Employees:
- could lose about 75% of their discretionary income to healthcare costs if employers raise the share they pay for health insurance by just 2%
What accounts for the rising cost of care?
Aside from perennial factors, like inflation and administration expenses, key drivers for the current surge in the cost of care include:
Delayed treatments due to COVID shutdowns
Because patients were generally not able to get x-rays, blood tests, and other types of screenings during the COVID shutdowns, two things occurred. Patients did not prioritize preventative care and delayed treatment for existing health conditions which may have worsened. As restrictions receded and patients resumed scheduling regular medical appointments, diagnoses for cancers and other serious conditions spiked along with increasing doctor visits for preventative care, elective surgeries, cancer treatments, and other therapies – and added to the bottom line.
More expensive prescription drugs
Recently, pharma companies have developed more effective drugs to treat serious medical conditions, like hepatitis C, HIV, and multiple sclerosis. However, these new drugs are more expensive than previous prescriptions. And that cost is being passed along to patients and health plans.
Pharma companies raising the prices they charge private health plans
According to Kiplinger, pharma companies are raising the prices they charge private health plans (and ultimately, employers) in order to account for the lower prices and rebates they will likely have to provide Medicare under the new Inflation Reduction Act.
Cost of specialty drugs can be exorbitant
Specialty drugs, like those used to treat cancer, can cost exorbitant amounts of money. The National Cancer Institute reports that the average cost of medical care and drugs exceeds $42K in just the one year following a cancer diagnosis.
Cellular Gene Therapies
Today, cellular therapies can target genetics and treat certain diseases for life with a single shot. But, the average therapy can cost about $1.5 million. Although there is only a small fraction of the population who would likely use this type of treatment, just one incidence can severely impact an employer’s health insurance budget. (Not to mention a patient’s wallet.)
Although the Federal Drug Administration (FDA) has only approved a few gene therapies, it projects that 10-20 new ones could be approved starting in 2025. This would create more opportunities for more people with more diseases to choose them if more traditional therapies prove ineffective. And further balloon overall health insurance costs.
Examples of New Gene Therapies [2]
Zynteglo for blood disorder - $2.8 million for a one-time injection
Skysona for a rare neurological disease – $3.0 million price tag
Continuous Drug Advertising
Since the FDA relaxed regulations on media advertising for brand named drugs (1997), commercials have covered the airwaves. In fact, in just a two-year period from 2016-2018, drug companies spent $17.8 billion on TV advertising. Experts say the overall effect has led to an increase in prescriptions for advertised drugs – even when lower-cost generics are available. And that continues to drive up the cost of care.
Aging of U.S. Society
By 2030, baby boomers will be aged 66-84. According to the National Council on Aging (NCOA), older adults are inordinately afflicted with chronic conditions, such as diabetes, arthritis, and heart disease. That could mean about 73 million people increasing their use of hospitals, doctors, health clinics, physical therapy, prescription drugs, etc.
Nearly 95% of older adults have at least one chronic condition, and nearly 80% have two or more. [National Council on Aging (NCOA)]
Cumulative effect of stress, obesity, and chronic conditions
National data attributes a staggering 85 percent of U.S. healthcare costs to care that’s necessary to treat chronic health conditions, like asthma, heart disease, high blood pressure, and diabetes. As health issues for the U.S. population increase, so does the risk of insuring the average American, and in turn, the cost of healthcare.
Nearly 40% of U.S. adults over the age of 20 are either overweight or obese, which can lead to chronic diseases and inflated healthcare spending. [3]
Growing Trend of Avoiding Care
Two reasons are contributing to this overall trend. First, lack of price transparency may contribute to the 44 percent of people who currently avoid obtaining health care because they don’t know what it will cost. Second, although people may have health insurance, deductibles are rising. Even if they know how much it will cost, people may find that they can’t pay for treatment out-of-pocket, so they put off getting they care they need. Either way, by avoiding care, conditions can worsen, ultimately driving up the cost when treatment is finally sought.
Bottom Line?
Employers need insightful guidance that will help them mitigate the rising cost of care on their health benefits spending. Our professional benefits Advisors will develop an effective strategy that can help enable you to continue providing affordable and valuable health benefits to your employees.
Contact us today to find out how we can help you manage healthcare rising costs. www.bks-partners.com | 866.279.0698
[1] U.S. Department of Health and Human Services
[2] Axios “Multimillion-dollar gene therapies offer hope and huge cost concerns“
[3] PeopleKeep “Eight reasons for rising healthcare costs“
Disclaimer: This material has been prepared for informational purposes only. BRP Group, Inc. and its affiliates, do not provide tax, legal or accounting advice. Please consult with your own tax, legal or accounting professionals before engaging in any transaction.
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