Climbing Health Care Costs Result in Elevated Employer Vigilance

Ellen Kelsay, President and CEO of Business Group on Health

My colleagues at Business Group on Health and I huddle each year to make predictions for the months ahead, in terms of healthcare cost and delivery, well‐being and workforce strategy. These unique observations, directly tied to the Business Group’s original research and other findings, comprise our annual “Trends to Watch.”

I’d like to share a few highlights of what we’ve identified for 2024, which includes crucial challenges for our 440-plus members representing large, self-insured employers and others across the industry.

First, we will be keenly focused on healthcare costs, which will continue to surge and will result in heightened vigilance by employers. Soaring healthcare costs show little sign of abating in 2024, and concerns about the affordability of medications and medical services continue to grow, despite investments in technology, clinical innovation, and efforts to manage utilization and waste.

According to the Business Group’s 2024 Large Employer Health Care Strategy Survey, employers face a forecasted higher-than-historical cost trend and have a greater sense of urgency concerning affordability, fueled by interconnected factors that include general inflation, labor pressures on health care systems, growing concern over provider shortages, burgeoning mental health needs, missed and deferred preventive screenings leading to more late-stage cancer diagnoses, and worsening of chronic conditions.

More specifically, our annual survey reported about a 6% increase in healthcare trend for the forthcoming year, while subsequent estimates from other groups showed even higher jumps in cost. As indicated above, there are many factors fueling these higher trend projections.

These include the swiftly growing demand for high-cost drugs, such as GLP-1s, as it specifically pertains to the treatment of obesity. These drugs, as well as expensive cell and gene therapies, represent current and future cost drivers for self-funded employers, who seek to promote value in healthcare and quality of services for their members.

Another trend we expect to see in 2024 is for employers to double down on cancer and other serious or chronic conditions. Cancer remains the top cost driver for employers, according to the Business Group on Health’s 2024 Large Employer Health Care Strategy Survey.

Nearly half of employers expect a higher prevalence of late-stage cancers due to delayed screenings, exacerbating an already challenging scenario. In response, employers are prioritizing prevention by introducing enhanced screening options while stepping up efforts in cancer patient navigation.

Further, employers expect to see higher needs in 2024 for chronic condition management; for diabetes, cardiac health, and musculoskeletal conditions, a higher number of cases may be coupled with greater severity.

Employers have also emphasized a “back to basics” approach to physical health, with a renewed emphasis on prevention and primary care, to help to avoid deferred care and the associated late-stage conditions and costs. Meanwhile, advances in medical treatment may result in more personalized, precise care for employees. Employers may increasingly look to approaches such as biomarker screenings and pre-treatment genetic testing, for example, as paths to boost patient experience and outcomes.

In 2024, employers will also express growing alarm over the sustainability of and lack of transparency into drug pricing. One hundred percent of employers surveyed have some level of concern related to prescription drug trend, which is greatly fueling overall health care trend, according to Business Group on Health’s annual survey.

This comes as employers experienced an increase in the median percentage of health care dollars spent on pharmacy, from 21% in 2021 to 24% in 2022. For 2024, employers said they planned to deploy various pharmacy management strategies.

As noted earlier, specialty medications, as well as recent innovations in the pharmacy space, have contributed to the surge in cost. Curative treatments such as cell and gene therapies come at a steep cost to employers and patients alike, while specific drugs, such as the aforementioned GLP-1s, may have more widespread use. Most employers do not dispute the drugs’ benefit for those for whom they are appropriate; their concern has to do with the cost of the therapies for both the plan and patients. Increasingly, employers have also demanded greater transparency for prescription drug pricing as well as alternative economic models, including “rebate-free” programs.

Without transformation within the pharmaceutical market, employer plans—and the broader healthcare system—may crumble under the weight of unsustainable drug pricing. In the months ahead, Business Group on Health will monitor myriad healthcare and workforce issues, as well as the external factors that shape them.

In addition to the trends described above, employers remain keenly focused on expanding access to mental health services, especially in the increasingly critical areas of youth and adolescent mental health and suicide prevention. The 2024 elections will certainly bring an intensified focus on a range of healthcare and workforce issues as Americans decide on the president, control of both houses of Congress, and races at the state and local levels.

All the 2024 trends we identified share one characteristic: They require a greater level of accountability across the entire ecosystem. And as employers expect more from their partners in terms of quality, patient outcomes will improve, across the nation and around the globe.

About the Author

Ellen Kelsay is the president and CEO of Business Group on Health, the leading non-profit organization representing large employers’ perspectives on optimizing workforce strategy through innovative health, benefits and well-being solutions and on health policy issues.