Better communication between human resources and benefits professionals and the finance department will be a priority going forward. (Photo: Shutterstock)

Health benefits are second only to employee compensation as the largest HR expense for most companies. It’s no surprise that cost containment is a top concern for CFOs as inflation hits its highest level in decades.

In a recent Mercer survey, more than half of CFOs ranked it among their top five concerns, and nearly two-thirds said costs must be at or below the consumer price index to be sustainable. for their organization.

Related: CFOs now control the design of health plans

“As we enter the second quarter of 2022, the list of healthcare cost drivers grows – higher utilization due to ‘catch-up’ care, long COVID claims, introduction new gene and cell therapies and the impact of avoided therapies in healthcare are all putting upward pressure on costs,” according to the survey report. “Even more worryingly, we are witnessing the highest inflation we have seen in 40 years in many sectors of the economy.While the growth in health care costs accelerated somewhat last year, the total impact of inflation in the care sector has been mitigated by vendor contracts that lock in prices for several years.As these are renewed, we could see some truly mind-boggling price increases, as well as greater volatility in claims. ions.

Another complication is that CFOs must balance costs with employee retention during the big resignation. When asked which cost management strategies should be favored, most CFOs were less supportive of plan design changes than provider network strategies or clinical management programs. Changes to plan design generally shift costs to employees, creating a greater risk of dissatisfaction.

CFO Cost Reduction Strategies

Given tight labor market conditions, it’s understandable that CFOs prefer strategies that don’t increase the financial burden on employees. However, more than six in 10 respondents say they are not convinced that long-term cost management strategies that require investment actually save money.

“Companies should consider a multi-pronged evaluation strategy that considers the effectiveness of cost management interventions across interventions, at a segmented level, and at a program level,” the report says. “Given the rapid growth in adoption of these solutions, taking a portfolio approach to tracking these investments could prove useful.”

More than half of CFOs surveyed are unaware of the volatility and uncertainty ahead. More communication between HR and benefits professionals and the finance department will be a priority going forward, according to Mercer.

“Our advice is to play both defense and attack – preparing for greater volatility while taking steps to slow cost growth,” the report concludes. “Of course, employers must balance the need to mitigate cost trends against already high levels of health care costs, a tight labor market, accelerating inflation in other sectors of the economy, the acceleration of very expensive new gene therapies, etc.

“However, not acting is not a good option. Rigorous management of the plan will be essential to successfully weather the turbulent times ahead. »

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