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Companies Grapple with Rising Health Care Costs

Companies’ health care costs are rising steeply, leading finance chiefs to look for alternative ways of attracting and retaining employees, according to The Wall Street Journal (subscription). 

What’s going on: “Health-insurance costs, which are among the largest expenses for many U.S. companies, are projected to rise around 6.5% for 2024, according to consulting firm Mercer.”

  • “The surge … may add significantly to costs for employer plans that Mercer said already average more than $14,000 a year per employee. Many companies are expected to take on most of the increases … ”

​​​​​​​ Why it’s happening: In addition to inflation and higher interest rates, rising health care price tags are the result of a combination of higher labor costs in hospitals and elsewhere in the health care system, a rise in elective care (which declined during the global pandemic) and a demand for new drugs.

The response: Finance officers are largely seeking ways to manage the growing costs without “add[ing] pressure to employees’ budgets as health care costs rise,” according to the Journal.

  • Whether that will be possible in the longer term will depend mainly on the state of the labor market and how high prices rise.
  • Some companies are considering sharing the increased cost burden with employees, while others are pushing preventive care as a way to save money down the road. 

The last word: “Manufacturers feel a deep commitment to providing high-quality health care to their employees despite the increased costs of doing so,” said NAM Director of Domestic Policy Julia Bogue.

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