We've seen the rise of new employee benefits perks over the past few years. You've read them in our blogs, seem them in the headlines, and may have even started to implement them. But the fact still remains that one of the most sought-after types of employee benefits you can offer your employees are medical benefits, such as health insurance and pharmacy benefits.
However, employee health benefits are likely to rise by at least 5% in 2020. In this article by Pacific Prime, we'll take you through all you need to know about this revelation and how you can best prepare for rising HR costs in your company.
How much will employee benefits costs rise in 2020?
The cost of employee medical benefits is expected to rise by 5% in the US, reaching USD $15,000 per employee in 2020, according to an annual survey of nearly 150 US corporations, conducted by the National Business Group on Health (NBGH).
Why employee benefits costs will rise in 2020
There are various factors that are pushing up employee benefits costs in 2020. Here, we will go through three of the most significant factors driving up employee benefits costs in 2020.
1. Demographic shift
By the end of the next decade, every single baby boomer (born between 1944 and 1964) will be 65 years or older, according to the US Census Bureau's 2017 National Population Projections. This means that as we enter the 2020s, the generation that made up the core of your workforce will be entering their 50s and planning for retirement. As your core workforce ages, health issues will naturally become more common.
For your business, this means more health insurance claims and sick leaves that will put a strain on your HR costs. The total national health expenditure in the US is projected to reach USD $4 billion by 2020 and USD $5 billion by 2025. Meanwhile, Mercer estimates that the US will face a shortage of around 29,000 nurse practitioners and 100,000 nursing assistants by 2025, thanks to its aging population. At just five years away, the financial strains are already beginning to reflect on employee health benefits costs for US companies.
Millennial demands
While younger employees value health insurance coverage provided by their employers, wellness programs, such as Employee Assistance Programs and financial wellness programs, are also becoming increasingly popular with this younger generation of workers. NBGH's report found that millennials (born between 1981 and 1996) are the most engaged generation when it comes to wellness programs.
As millennials begin to form the bulk of the US's workforce, large firms will need to spend more on wellness programs to retain their employees and keep them engaged at work. In the same report, 75% of all surveyed employers in the US stated that they have plans to expand investments in employee well-being in the next 3 to 5 years.
2. Drugs are costing more
Compared to most other countries, the US places very few regulations on drug companies, allowing them to set their own prices for any given drug they produce. As a result, US drug prices are much higher than in other countries. Mercer's recent report showed that for branded and generic drug prices, the US is the most expensive country in the world, with average drug prices being up to 306.82% more than the global median price.
As the US population ages and the demand for healthcare continues to rise, US drug prices are unlikely to get any cheaper in the coming years. In contrast, the increase in demand for drugs from the country's aging population is likely to push up drug prices even higher.
Hence, corporations that provide pharmacy benefits contracts may face higher costs in the upcoming years. To cope with the high drug prices, three out of four large employers are starting to support national funding to underwrite part of the cost of expensive drugs, despite them traditionally being against such policies, according to NBGH President and CEO Brain Marcotte.
3. Health insurance premiums are rising
Health insurance in the US has been notoriously high for years, reflecting the sky-rocketing cost of healthcare in the country. Pacific Prime's Cost of International Health Insurance 2019 report found that the US has the most expensive health insurance premiums out of the 100 countries surveyed.
The country's average individual premium in 2019 stood at USD $8,887, while the average family premium in 2019 stood at USD $26,883, both increasing by 5% from 2018. This is extremely expensive when you compare the premium costs to other developed countries, such as USD $12,620 for individual plans in Australia or USD $13,216 in the UK.
Finding the most cost-effective employee benefits in the US
Employee benefit plans can be costly for a company, especially when they come with costly add-ons and lengthy exclusions. With an international broker like Pacific Prime, you will be able to compare a wide array of employee benefits to make an informed decision on which plan best suits your company's business goals.
Our staff are experts in the field of employee benefits, working with both local companies and multinationals to deliver employee benefits solutions that are both impactful and cost-effective. To find more information, you can visit our corporate health insurance page or contact our team of experts today!