Given the annual cost of healthcare, you’d expect the U.S. to have one of the best-performing systems in the world.
What’s the old adage say, ‘You get what you pay for?’ Sadly, that’s not the case. All recent data points to high spend and increasing costs for employers and ineffective usage. For example:
- According to research from The Commonwealth Fund, the U.S. spends more on healthcare than any other high-income country, but has the lowest life expectancy.
And though we spend more than any other country, healthcare costs continue to rise each year—both for families and their employers.
- Families: The average single and family premium increased 4% last year (while wages only increased 3.4% and inflation increased 2.1%), based on KFF data.
- Employers: PwC’s Health Research Institute found that the medical cost trend for employers increased 6% this past year, (a higher increase than the past 3 years).
On top of all of that, we have the pandemic-related fluctuations to take into consideration. COVID is expected to cause even higher healthcare costs for employers in 2021 and beyond:
All these increases come at a time when employers already spend $1.2 trillion each year on health benefits.
The fact is, reining in health costs is no longer an abstract “nice to have” item on your organization’s financial to-do list—it’s an essential business imperative if you want to remain competitive, sustain healthy growth, and provide shareholder value.
HR and C-suite alignment… or lack thereof
With the importance of healthcare cost containment to future business success, we wanted to learn more about how the C-suite and human resources are joining forces to solve this challenge.
The C-suite and HR must be partnering to decrease healthcare and benefits spend for their organizations, right? Well….in many cases, they’re simply not.
Our report found disconnects between company leaders and their HR teams in the areas of:
- Prioritization: How important is reducing healthcare costs for the business?
- Figuring out the root causes: Why aren’t you getting more bang for all those bucks?
- Identifying potential ramifications if rising costs aren’t addressed: What, exactly, is at stake?
So how do they overcome this hurdle? We know the C-suite is committed to controlling healthcare costs, and to do so, they need to achieve lockstep alignment with their HR partners. Moreover, HR teams are benefits experts, they know what matters to employees, their organization’s healthcare history, and overall benefits offerings.
If companies want to wrangle in out-of-control healthcare spending, they need to leverage the expertise of both the C-suite and HR. But, this is easier said than done. Read on to find out where the problems start, and how to bring them to an end. It’s past time to work together to reign in runaway healthcare costs for good.
Prioritization predicament
When it comes to controlling health costs, the C-suite is more concerned.
Company leadership is concerned about rising healthcare and benefits costs for the business.
Respondents who strongly agree:
The C-suite is 50% more likely than HR to strongly agree that company leadership is deeply worried about healthcare spend.
Let’s start with a bit of good news. Both HR team members and C-suite know that controlling healthcare costs is on the radar for company leadership (as it should be). When asked if company leadership is concerned about the issue, 85% of HR folks agree or somewhat agree. Similarly, 91% of C-suite executives agree or somewhat agree.
The disconnect starts when we look at the people who strongly agree that healthcare costs are a major concern for company leadership. The C-suite is 50% more likely than HR to strongly agree that company leadership is worried about rising costs.
The C-suite says healthcare spending is a top priority, but HR isn’t so sure.
Controlling healthcare and benefits costs for the business is a top priority.
Respondents who strongly agree:
The C-suite is 50% more likely than HR to strongly agree that controlling costs is a top priority.
We saw similarly mixed responses when we asked if controlling costs is a top priority for the business. Overall, 86% of HR professionals and 91% of the C-suite somewhat or strongly agree that healthcare and benefits costs represent a primary priority. But, again, the C-suite is nearly 50% more likely to strongly agree it’s a top business priority.
Section 1 Takeaways
What’s it mean?
The companies with the biggest healthcare cost problems also have the biggest misalignment issues. When healthcare spending is a serious situation (and the C-suite confirms, strongly agreeing it is), HR isn’t looped in.
Additionally, HR and leadership aren’t on the same page with prioritization. HR teams wonder, Where does reining in healthcare and benefit prices fall on the list of company priorities and budgetary issues? Is it a top priority or not?
The Solution
It’s up to the C-suite to clarify these types of questions. After all, If HR doesn’t know it’s a problem, how can they help and be part of the solution? And let’s be honest here, each organization needs HR expertise to overcome this hurdle.
Division of duty
CHRO vs. CEO: When it comes to healthcare costs, who’s in charge?
Who in your organization is most focused on controlling healthcare and benefits costs for the business? Select up to three.
The CEO or founder owns it.
It’s on the CHRO’s plate.
When we examined who’s responsible for healthcare costs—i.e., keeping a pulse on the numbers and delivering results—the C-suite and HR pointed fingers in opposite directions. (Think “Spiderman pointing” meme). Each of them believed those responsibilities fell under different roles.
Section 2 Takeaways
What’s it mean?
Let’s try to break down the tangled web organizations are weaving:
- HR thinks the CHRO is responsible.
- The C-suite thinks the CEO is responsible.
So what’s the right answer? Without a clear understanding of ownership, companies risk the ball being dropped. Additionally, they’ll find it difficult to develop a comprehensive solution (if no one owns the problem, no one will prioritize fixing it).
The Solution
As the Beatles would say, HR and C-suite need to come together, right now to establish clear divisions of duty. Poor communication leads to poor decisions, or worse, no decisions at all. Don’t let your action be inaction, or leave your team members pointing fingers when you finally realize someone needs to tackle rising healthcare costs.
The cost of confusion
The C-suite is distressed about employee confusion
Do you believe employee confusion is a major cause of rising healthcare and benefits costs for the business?
Respondents who strongly agree:
The C-suite is 2x more likely than HR to strongly believe employee confusion is a cause of rising benefits costs.
You hired your employees because of their knowledge in their field and their experience with their role—not because they’re healthcare or benefits experts. (Excluding your HR team, of course 😉). So it should come as no surprise that there’s a learning curve to figure out complex healthcare and benefits programs.
Just think about some of the most common employee missteps with healthcare and benefits:
- Over-insuring
- Visiting out-of-network providers
- Not properly utilizing resources to manage chronic conditions
- And the list goes on…
Unfortunately, these actions all equate to wasted benefits spending. That’s why we asked HR and C-suite professionals if they thought employee confusion is causing a spike in healthcare costs. More of the C-suite were worried about it, with 83% somewhat or strongly agreeing, while only 64% of HR folks said the same. Again, the contrast between C-suite and HR opinion is more pronounced when you look at those who strongly agree or disagree that employee confusion is a serious issue.
Do you believe employee confusion is a major cause of rising healthcare and benefits costs for the business?
Ex: over-insured employees, employees who visit out-of-network providers, employees who don’t understand chronic condition management resources, etc.
Employee confusion means money slipping through your fingers
What percentage of your business’ annual healthcare spending do you believe is wasted because of employee confusion?
Respondents selected a number on a sliding scale of 1 – 100. Averages were calculated for this report.
Let’s get down to brass tacks. Exactly how much money is really wasted due to well-intentioned but misinformed employees? As our report shows, well, a lot.
On average, HR teams estimate 40% of their company’s total healthcare spend is wasted due to employee confusion. The C-suite thinks it’s more than that, clocking it at 53%.
Let’s take that in: this means execs believe they could reduce healthcare costs by half if they eliminate employee confusion—HALF! 🤯
Section 3 Takeaways
What’s it mean?
We’ll say it again for those in the back: Execs believe they can cut healthcare costs in HALF if they eliminate employee confusion. Just imagine what you could do with that huge chunk of your budget freed up!
If you’ve spent any time on our blog, or work with us, you know that at Jellyvision, we like to shout about the high price tag of employee benefits confusion. But putting a number on it, like 50% of your business’ annual healthcare spend, shines a whole new light on the situation.
The Solution
Companies that reduce—or better yet, eliminate—employee confusion will see returns in the form of major savings, not to mention more money in your employee’s pockets, leading to happier employers and team members.
The debate on healthcare investment
The C-suite believes they’re offering better healthcare resources, but HR doesn’t agree.
My company has been increasing our investment in healthcare and wellness.
Respondents who strongly agree
The C-suite is nearly 2x more likely to strongly believe they are increasing health and wellness investments.
Despite rapidly increasing benefits and healthcare spending, companies are doubling down on their investment in health and wellness. So while they’re worried about the rising costs, they also want to keep up with the Joneses as far as offerings. Rightfully so, as in 2021, your benefits need to serve a diverse employee population, help you compete for and retain top talent, promote productivity, and most importantly—support your team.
However, there’s a disconnect here as well. While 89% of the C-suite strongly or somewhat agree they’re increasing benefits investments, only 74% of HR folks think the same. And when we compare the people who most strongly agree, the misalignment between HR and C-suite becomes even more pronounced. The C-suite is nearly 2X more likely to strongly believe they are increasing health and wellness investments.
Section 4 Takeaways
What’s it mean?
At the end of the day, what’s even more important than increasing investment in health and wellness? Maximizing your return on investment. You can spend all the money you want on healthcare and benefits, if you don’t see new advantages for your team members or company, that’s not money well spent. It’s all for nothing unless employees are engaging with those benefits throughout the year.
The Solution
Put simply, when you spend more money on health or benefits, you need to spend more time on employee benefits education. To maximize your investment, it’s critical to ensure that employees understand and engage with those new options. And not just at enrollment! (A common blunder of so many organizations), but at every moment that matters. Educate, assist, and support your team throughout the year to make the most of your investment in health and wellness. You can provide world-class health benefits, but it only makes a difference when employees choose and use those offerings.
The ripple effect of rising costs
What’s at stake? Different roles offer different answers.
HR is worried about…
Unhappy employees
Employee turnover
Difficulties attracting talent
The C-Suite is worried about…
Decreased revenue
Layoffs
Increased costs for employees
We picked the brains of our survey respondents, asking about their expectations if healthcare and benefits costs aren’t controlled, and what happens on that unsustainable trajectory. To get a full picture of their robust opinions, we gave them the opportunity to submit open responses.
Looking for the most common themes, we found that HR is concerned about employee happiness, while the C-suite is focused on the bottom line. The quoted answers below illustrate the difference in opinion between the two camps.
What are the expected consequences for the business if healthcare and benefits costs are not controlled?
HR
“Can’t provide benefits and therefore won’t be able to keep good employees”
“Lack of happiness and overall production among employees if there is too much cost or poor benefits”
“Unhappy employees and inability to keep them”
“Makes the company less attractive to potential employees”
“It will be difficult to retain talent and keep up with our competitors”
C-Suite
“Reduction in force (RIF) and/or layoffs”
“The business could very well go under if the healthcare costs and expenditures are not controlled”
“The costs of healthcare will continue to rise making it nearly impossible to offer benefits that our employees truly deserve”
“We will not be able to afford the benefits and employees will have to pay more out of their paychecks”
“Decreased revenue growth”
“Higher spend, less ROI, less company revenue and more employee health incidents”
Section 5 Takeaways
What’s it mean?
When you think about it, it’s only natural that the C-suite and HR won’t see eye-to-eye on every issue. The two teams have different focus areas and functions, as they’re supposed to. While C-suite worries about a business’s bottom line, HR prioritizes its people. As such, these different concerns translate to how they view the impact of rising healthcare costs.
The biggest issue is that the two departments don’t agree on the ramifications of cost increases on their organization as a whole.
The Solution
The C-suite needs to be transparent with HR regarding their concerns about increasing costs. While HR will always focus on the people in the organization (that’s their job), if problems are as big as the C-suite believes, they will impact more than just candidate and employee experience, but everyone’s very livelihood.
The bottom line: Leadership and HR need to be on the same page about their worries and work together to address each one.
The (almost) agreement between HR and C-suite
There is one area, arguably the most important area, where HR and the C-suite (nearly) agree: The solution
When asked about the most important tactics to reign in healthcare spending, HR and C-suite chose the same strategy: Empowering employees to make smart benefits and care decisions.
More than half of HR professionals and two thirds of the C-suite think empowering employees is the key to reining in healthcare spend.
Everyone agrees that driving engagement with the right benefits, at the right time, leads to lower costs. Phew…at least we found agreement somewhere. 🙌🏼
Which of the following strategies are most important to control healthcare and benefits costs for the business?
Section 6 Takeaways
What’s it mean?
Survey says….employee education is the best way to address rising healthcare costs. HR is also nearly as likely to opt for additional care options (such as on-site clinics or telemedicine).
The data further illuminates the power of benefits engagement on your business’s budget.
The Solution
As both camps agree, empowering employees is the best way to address challenging healthcare costs. Whether you’re C-suite or HR, the best support you can offer is helping employees engage with their benefits in the most effective ways for them. This will decrease confusion, improper healthcare usage, and costs—for the company and its staff.
Remember, the right benefits choices benefit both employers and their employees.
Top lessons learned
If the C-suite wants to limit healthcare and benefits spending, the first step is opening the lines of communication between HR and exec teams, on several fronts.
Two-thirds of the C-suite strongly agree that reining in healthcare and benefits spending is a top business priority. However, their HR counterparts are 50% less likely to concur, effectively saying it’s bogus that it’s one of their main priorities. Share your priorities, y’all!
If companies want to reduce spending (and do it the right way), C-suite needs HR and their expertise. The entire human resource role is focused on benefits offerings, costs, usage, and most important—employees’ wants and needs.
Organizations can’t reduce spending without knowing where and how to cut costs, i.e., what’s really running up the tab, which benefits are must-haves, and where are the areas they can cut back without negatively impacting staff health and happiness. Hint: C-suite needs HR to understand these finer points. You wouldn’t just snip snip line items without understanding the entire budget, right?
Confusion is the costliest expenditure. If you still don’t believe us, (how could you not?) let’s recap the data.
Executive teams think they can reduce healthcare costs by more than half if they eliminate employee confusion and help their teams make smarter decisions. HR teams think it’s slightly less than half. Either way, that’s a lot of cheddar! Compared to HR teams, the C-suite believes—by more than a 2-to-1 ratio—that confused or misinformed employees are the main cause of out-of-control healthcare/benefits spending.
(That’s not to say that HR doesn’t think that’s a problem too, but they just have different viewpoints on the root cause).
There’s some confusion on what this confusion leads to. HR worries that if spending isn’t contained it will impact employee retention, while C-suite thinks it’s a bigger issue and will affect the company’s longevity. It’s time for C-suite to be upfront about the high stakes.
Here’s the one area where we can all agree: Helping employees make smarter benefits choices needs to be the primary goal.
HR and the C-suite were happy to see eye-to-eye on one important point—empowering employees to make smart choices is the best route to control healthcare costs.
But can you make everyone on your team health and benefits experts? Dream on, that’s just not their job. And as a friendly reminder, that’s also why the decade-long experiment of healthcare consumerism is failing.
The healthcare industry has attempted to consumer-ify healthcare and benefits choices to combat rising costs and solve longstanding issues. However, this has led to too many options and too little guidance, ultimately overwhelming individuals.
Taking control of healthcare spending
Say goodbye to costly benefits confusion.
Outside your control
Fee for service
Provider cost variance
Outdated provider administration systems
Middle payer models
Government regulations
Within your control
Plan selection
Prescription drugs
Avoiding the ER
Managing chronic conditions
Saving for retirement
Paying for care
The problem with healthcare spending is that some things are within your control, but some just … aren’t. Things like government regulations and outdated systems aren’t problems you can solve overnight. So, what is within your control? Helping employees make choices that benefit you and them: plan selection, chronic condition management, avoiding the ER… the list goes on.
In short, this all boils down to benefits engagement. And helping you get your employees engaged with their benefits is our specialty.
With ALEX, Jellyvision’s benefits engagement platform, you can help your employees choose and use their benefits in a way that benefits everyone. Through the power of behavioral science, ALEX helps you guide your employees to smart choices by keeping their attention, gaining their trust, and providing recommendations based on individual health and wealth needs. ALEX helps you:
- Explain your rich benefits offerings so employees understand the benefits that are right for their needs and make smart enrollment choices. Instead of over-insuring in costly plans, employees get the personalized enrollment support they deserve—saving you and your employees time and money.
- Intercept employees at key moments as they make care choices throughout the year. ALEX has the resources to answer employee questions 24/7 and connect them to your cost-saving tools and programs as they’re relevant—ensuring your benefits are being used to their fullest potential.
- Promote your cost-reduction strategies and guide your HSA-eligible employees to smart day-to-day spending and savings choices. With a suite of consumer-directed health accounts, ALEX HSA takes advantage of when employees use their HSA account to grab their attention and turn them into better consumers—helping you drive better financial outcomes.
Methodology
This survey was conducted in March 2021 by SurveyMonkey on behalf of Jellyvision. It surveyed 200 human resources professionals and 200 C-suite executives.
