Higher health costs make it harder for companies to hire workers, employers say

Employers say that higher healthcare costs are hurting their ability to recruit and retain workers.

Nearly three out of four employers (73%) said healthcare expenses are crowding out salary and wage increases, according to a new survey released by the National Alliance of Healthcare Purchaser Coalitions.

More than 150 employers participated in the survey, and 82% said high healthcare costs are affecting their ability to remain competitive.

Nearly all of those surveyed (93%) cited drug costs as the most significant cost drivers for health benefits coverage for workers. However, high-cost claims (87%) and hospital costs (79%) weren’t that far behind.

Michael Thompson, National Alliance president and CEO, said employers are in a “street fight” to hire and retain workers, and rising healthcare costs are taking a toll.

“Concerns about a recession and runaway inflation make it even more critical that employers are able to hire and keep top talent, and getting unreasonable healthcare costs under control can have far-reaching impact on wages and ability to compete,” Thompson said in a statement.

Employers have issues with hospital pricing and transparency, according to the survey.

Most plan sponsors (97%) said they view hospital prices as unreasonable or indefensible, the survey found. Nearly as many (93%) said they didn’t think that hospital consolidations have led to better quality or lower costs.

Almost half of employers (46%) said they expect to see increased use of tiered networks in the next 1-3 years. With tiered networks, health plans put providers with better care and lower costs in a preferred tier, and those with higher costs and lower quality aren’t ranked as highly.

Companies that are familiar with transparency tools, such as those from RAND and the National Academy for State Health Policy, are 6-10 times more likely to say that hospital prices aren’t reasonable, the National Alliance said.

Most employers are looking at expanding mental health and substance use offerings (94%), while 93% said they are or will look for more hospital quality transparency (93%) and hospital price transparency (91%). Nine out of 10 employers are employing or considering high-cost claims management (94%) and whole person health approaches that encompass physical and emotional wellness (90%).

Employers have been growing more vocal about the concerns of healthcare expenses in recent months.

In August, the Business Group on Health said employers are concerned about rising costs, especially as some people have deferred healthcare needs during the COVID-19 pandemic and are now sicker and need treatment.

Employers are growing increasingly frustrated with high healthcare costs and troubling indicators of patient safety at hospitals, Leah Binder, president and CEO of The Leapfrog Group, told Chief Healthcare Executive in June. “Hospital leaders should get in front of it,” she said.

“I'll tell you right now, employers are fed up,” Binder said. “They are so upset by the data they are seeing in quality and safety right now. They are going to be doing everything they can to monitor this and try and address it through whatever means they have.”

Employers are focused on healthcare because they recognize they need to do whatever they can to entice workers to join them, or stick around.

The National Alliance survey found more than three-quarters (78%) say attracting and retaining employers is an even higher priority post-pandemic, and 100% of respondents said health and well-being efforts are critical to that effort.

With the keen competition for talent, two out of three employers (66%) said they were permitting remote work either part-time or full-time. Most participants (85%) said that workforce requirements will allow more flexibility for workers post-pandemic.

Even as companies recognize remote work needs to be an option, some employers don’t necessarily agree with adjusting health and wellness benefits for hybrid environments.

Nearly a third (31%) said they didn’t think health strategies needed to be modified for hybrid workplaces.