Can We Stop Shifting Rising Healthcare Costs to Employees?

By Kim Eckelbarger

For more than 10 years the inflation rate of healthcare costs has outpaced annual raises. We can’t keep shifting these costs to employees and eating up their raises. Financial conditions for our employees are getting worse every year because of healthcare. It is the number one cause of bankruptcy. It needs to stop, and HR can help.

CEOs and CFOs of large companies recognize the strategic value of HR, but midsize employers typically misplace our contributions into the category of a cost center. In these organizations, HR is viewed as part of the expense line on the profit and loss statement and assigned to the cost of doing business with no return.

HR can impact strategy when they understand the needs of their management team. Why is this important? Look at the six needs everyone has, according to Tony Robbins:

• Certainty
• Variety
• Growth
• Contribution
• Connection
• Significance

We all have these needs, but inside the workplace, different roles place some of these needs higher than others. In HR we want contribution and connection. The CEO wants certainty and growth. The CFO wants certainty and significance. If you’re an HR professional, you need to know how to speak to significance, certainty, and growth. They will also want to know if the strategies you bring to the table are legal, predictable, and repeatable.

Look toward the benefits package to find strategies that are significant and repeatable. There are all kinds of tools available to reduce costs at hospitals and on medicines and when in place they bring savings year after year. You are looking for strategies that reduce the severity of the financial impact of claims, as well as tracking how many intermediaries are getting paid inside the supply chain of your benefits plan.

Want to help your frontline employees? Then you must help your CFO or CEO understand how cost shifting impacts employees. For example:

Today, we see family deductibles on health plans that are set at about 20% of a person’s gross wages ($4,000 per employee, times two for families which is $8,000). Every $1,000 of cost shifting to the deductible equates to 3% to 5% of gross wages for those with families working on the front line if they need care. For CFOs to feel the same amount of pain, it would be an equivalent of about a $40,000 deductible for their family, assuming their wages are $200,000 annually.

When shown this way, CFOs or CEOs will understand how much their people are hurting. Keep in mind that even though CFOs may earn a higher salary, they also are likely to be living paycheck to paycheck as well. That is why it helps to show this as a percent of wages. The CEO and CFO will not want to continue to cost shift by increasing the deductibles. You will find that they care about their people. They didn’t understand how a small increase in deductible can send their employees into financial distress when a healthcare event occurs inside their family.

Communicating appropriately, paired with strategies that achieve outcomes, aligns HR and other management team members to work on the same side of the table, improve the bottom-line financial strength of their company, and stop the year-over-year cost shifting to employees.

Kim Eckelbarger is the Founder of Tropical Benefits. Kim has been helping employers for more than 15 years in the Health Benefits/Wellness Consulting industry. She provides preventative counseling to clients on a wide range of issues affecting the employment relationship. Kim practices in the execution layer and has case studies proving the ability to bend the rising healthcare cost curve. She is the co-author of Breaking Through the Status Quo, contributes to Employee Benefit News Magazine and was 2022 Broker of the Year finalist.