CFOs need to be prepared for a “higher end” of medical inflation — even if general inflation eases in the near future, tim Stawickicwas called Actuaries, Health and Benefits in North America by Willis Towers WatsonWTW) said CFO Dive.
With the consumer price index (CPI) Increase to 8.5% in July and the recent rise in the Central Producer Price Index (PPI), The Federal Reserve will likely try to raise interest rates further.
“CFOS need to be prepared in the event that they have another two or three years to think about how they manage the costs of health care plans as general inflation eases,” he said in an interview.
Inflation, which can affect consumer prices more directly, has a slightly different impact when it comes to the cost of medical care. “Employers pay healthcare costs based on multi-year contracts their insurers have with providers. So if there is no deal or contract with the hospital by 2023, then that provider has the option to renegotiate higher prices for three years,” he said Stawicki.
The current Best Practices in Healthcare Survey from WTW consisting of 455 US employers found the Employers expect their healthcare costs to increase by 6.0% next year, compared to an average 5.0% increase expected by the end of this year.
Employers also see little relief in sight — seven in ten (71%) expect moderate to significant cost increases over the next three years. Additionally, over half of respondents (54%) expect their expenses to go over budget this year.
Balance between talent retention and health costs
The talent bond has also remained stuck challenge for CFOs in recent months and continues to be in the foreground.
With inflationary pressures and a possible looming recession, employers are struggling to find the workers they need to run their businesses. A rise in health care costs will make this even more difficult, Stawicki said. “Employers look around and say, ‘I need to find talent to help me run my business, and I can’t do that if I have an ineffective health benefits program,'” he said.
According to WTW, there is a direct correlation between business outcomes, and specifically employee productivity, and employees’ ability to manage their health and financial environments Global Benefits Attitude Survey. “The loss of the ability to provide programs and benefits that meet employee needs impacts business,” Stawicki said.
It’s important to find the balance between managing costs in an environment where talent is hard to find, he said. For CFOs to be successful at funding benefit programs, they need to find ways to collaborate with their HR colleagues, Stawicki said.
Sixty-seven percent of employers said management of business costs was a top priority in the company’s August Healthcare Best Practices Survey, versus 42 percent who said affordability for employees was a top priority. In the near future, CFOs need to develop a relationship with HR colleagues that will provide “opportunities to manage company costs without offloading them to employees,” Stawicki said.
Ultimately, business costs remain of paramount importance to employers, but to run a successful business, employee affordability must also be a priority.