Introduction
Employers face the challenge of balancing cost in their organization. One of the most considerable costs of running a business is the compensation of their employees. On average, benefits cost adds around 30% to an employer’s total compensation (Vogenberg & Santilli, 2018). The impact of rising healthcare costs and the national healthcare issue have been at the forefront since the Affordable Health Care Act was established in 2010 (HHS, 2019). Americans spent a substantial amount of cash in their healthcare since the inception of Medicare and Medicaid nine years ago. Government policy is responsible for significant increases in healthcare costs in America. However, service providers managed to increase prices for their services, as the services rendered benefit to Americans without healthcare insurance. The rest of the population rely on healthcare service sponsored by companies. According to Duggan, Goda, and Jackson, (2019), America spent approximately $3.5 trillion on healthcare in 2017 based on statistics found in the American Medical Association. The study also noted the five factors that affect healthcare delivery as a steady growing population, aging citizens, medical service utilization. Others were disease prevalence or incidence, and service price and intensity. While all the factors above significantly affect healthcare, increase in population, and aging population remain the two most influential of the elements.
Cooper and Gardner (2016) did a research to determine the contribution of each factor above to increase in healthcare costs. The study found out that service price and intensity included the rising cost of pharmaceutical drugs contributed to more than 50 percent of the rise. The other half of the growth varied from the health condition of the population and type of healthcare service they acquired. In a working environment, the issue of the aging population does not have much effect on an employer, as the majority of employees are young and energetic. Despite that fact, the wage bill for healthcare has been on the increase from the employers’ perspective, raising questions over the possible causes of the rise and the potential impact on the employee benefits (Warshaw, 2017). The research paper seeks to determine the possible causes of an increase in health care costs and its immediate effect on the employee benefits with special consideration of the national healthcare issues and the changes affecting the employers in their effort to offer their employees’ healthcare cover.
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Hypothesis
The hypotheses developed in this research are that (a) the rising healthcare insurance premiums have been a significant contributor to the increasing cost of health care services since the inception of the Medicare and Medicaid services in America; (b) the Ambulatory costs have been on the increase by double since Medicare and Medicaid services implementation in America; (c) employers are required to increase their resources by at least 30 percent to cover the increase in the healthcare costs for their employees accordingly; and (d) employees are required to pay an equal sum of money towards their healthcare cover; thus, their healthcare expenses are going to increase by at least 30 percent.
Research Question
The rising healthcare premiums require employers to increase their total healthcare expenditure to cover their employees’ health as per legal requirements. Besides the healthcare premium increase, ambulatory increases by a given percentage require readjustment of the employee’s expenses as far as healthcare is concerned. A potential average of a 30 percent raise in their earnings are channeled to healthcare. Given that employees must pay an equal amount to their benefits legally, employers might find other channels to reduce their expenses by minimizing allowances and benefits to the employees. Therefore, the research seeks to answer the question ‘what are the possible effect of the rising healthcare costs on other benefits owed to the employees by the employers?’
Literature Review
According to Vu, et al. (2016), the Affordable Care Act (ACA), reforms sought to achieve the Triple Aims goal for the Centers of improving the quality and satisfaction of patient care as per the vision of Medicaid and Medicare Services (CMS). Additionally, ACA intended to improve the population health and reduce the overall costs used for healthcare services. As a result, ACA and CMS have made partnerships with various service insurance companies in a way to distribute the risks associated with the Triple Aim goals and increase coordination of care to Americans. The ACA and CMS intended to reduce the cost of healthcare for all Americans, including the employers and service providers. The researchers sought to examine the impact of ACA on the health of Americans based on the programs that resulted from the coming together of hospitals and insurance companies offering their services. The research sought successful major mergers and best practices on the wellness programs in America for nine years. The researchers also included 44 eligible articles in their analysis to come up with the result they managed from the study. The research result showed that despite the increasing healthcare costs in America, the joint ventures prevent hospitals and other healthcare centers from trading-off quality at the expense of cost reductions (Himmelstein et al., 2019). Therefore, the quality of service delivery ought to remain consistent despite efforts to reduce the overall cost of healthcare for all people.
Duggan, Goda, and Jackson, (2019), noted that ACA reduces labor markets owing to the increased employee benefits and increased liabilities to pay more for their healthcare costs. Employers reduce their workforce to reduce their liability and avoid more employment opportunities to newcomers, thus affecting the overall labor markets. On the other hand, the employers will need to network more to add more investors on board to reduce their burden of paying more fees for healthcare purposes, thus enhancing collaborations amongst business partners.
In Essays in Health and Labor Economics, Anand, (2013) examines the connection between employers-sponsored health insurance service and its impact on the labor economic outcomes. The researcher first determines the effect of escalating health insurance costs on remuneration and employment in society. The author then seeks to assess the impact of ensuring employee premiums are tax-free on their wages and its impact on the overall amount that employees contribute to their healthcare. The researcher uses data from the National Compensation Survey (NCS) to obtain relevant information about the relationship by which establishments in America respond to the rising health insurance costs through adjusting employee benefit and employment. The research found out that establishments offering insurance covers for healthcare reduced the cost of healthcare by $0.52 for every dollar increase on healthcare insurance cost.
Further, Anand noted that establishments primarily relied on employee premium contributions, in addition to the rise in premium prices. The establishments meant that an increase in employee premium would directly affect the level in which the establishments could reduce employee expenditure for their healthcare (Cooper & Gardner, 2016). Further, the scholar notes that an introduction of the Section 125 plan does not trigger enough efforts for the employers to adjust employee benefits. Also, employment that would significantly reduce the cost of healthcare insurance and overall fees for their employees.
Larg, Moss, and Spurrier, (2019) conducted research that sought to understand the cause for the increasing cost for managing obesity condition in America and its link to other associated conditions. The researcher wanted to understand the effect of overweight and obesity on an acute municipal hospital for in-patients as expenditures keep escalating in South Australia over a given period as compared to other factors for the increase. The results of the research noted a considerable increase in spending of $30.5 million per year in South Australia. The growth had a significant change from the former 4.7 percent to 5.4 percent of the total expenditure on acute public in-patient spending. The increase accounted for 7.8 percent of overall expenditure growth while a 62.4 percent increase recorded at the rise in average cost per separation. While obesity is not the study of this research, it denotes the many illnesses that increase the total expenses on healthcare for employees. The researcher challenged the common perception about the effect of overweight on the overall expenditure for in-patients in Australia by attributing that consistent estimation of the attributable cost related to overweight could lead to tracking and comparing the condition with other controllable expenditure drivers that may as well require some attention.
Hornberger et al., (2015) researched the “cost-effectiveness of florbetapir –PET in the Alzheimer’s disease (AD)” based on the Spanish societal perspective noting that the prevalence of the AD and other illnesses associated with dementia put stakeholders into high risks, especially the elderly. The researcher notes that the management of AD is complicated due to disease-specific features that make it terrible to diagnose correctly during the milder stages of the illness. About the ACA. (2019) disease-specific features of the AD depend on the person and the scene that patients undergo while being diagnosed. The ACA reveals that age differences pose severe challenges as older people are at higher risk to complicate the illness as compared to younger people. Additionally, gender difference significantly hampers the effective with which standardization in treatment and diagnosis of the disease could take effect. Therefore, Hornberger et al., (2015) wanted to evaluate the potential long-term clinical as well as economic outcomes for the healthcare system to implement the florbetapir-PET-adjunctive to the regular clinical assessment (SCE) as opposed to just adopting the standalone SCE in assessing patients with cognitive impairment of patients with suspended AD. In that regard, the researchers noted that adjunctive florbetapir-PET adoption led to an increase of the quality of life years (QALYs) by 0.008 years and increased the cost by 36 as opposed to the standalone SCE. Therefore, diagnoses of AD illnesses will likely be more accurate with the inception of the new technology that seeks to improve the overall quality of healthcare services to the people.
Crawford, (2014) wrote an article that focused on a financial incentive plan for workers’ wellbeing as was introduced by Hallmark Cards Inc. 2011 through its business-to-business subsidiary connections. The report notes a significant decrease in the formerly rising cost of healthcare services that the company provided. The company provided incentives to motivate the employees from engaging in various aspects of physical activities that would generally reduce their chances of getting ill. On the other hand, research by Trumble and Pattath, (2013) reveal the economic gains for all employers who engage their human resource in office-based physical activities as they reduce the overall cost of maintaining a healthy workforce altogether. The article reveals the health benefits of employees taking time to engage in physical activities in a bid to promote healthy living (Gombocz, 2013). Besides avoiding to pay some considerable amounts of money to hospitals for their ailing employees, the employers are likely to benefit from healthy employees who spend more time at their workstations as they are healthy, thus increasing productivity and reducing hiring costs.
On the contrary, Cooper and Gardner, (2016) researched “Extensive Changes and Major Challenges Encountered in Health Insurance Markets under the Affordable Care Act” in which they note that despite the changes in the ACA and the changing terrains in the healthcare sector. Additionally, the various laws coming into place to streamline operations make it apparent that the increasing costs of healthcare remain a severe issue that needs serious attention from future researchers. The Republicans have tried to come up with laws that tend to reduce the cost of healthcare in hospitals and homesteads, but contemporary statistics indicate a steady increase still (Gorin & Moniz, 2017) notwithstanding. Gombocz, (2013) conducted a research about the “Changing the model in Pharma and Healthcare - Can we afford to wait any longer?” in which the changing models in the Pharma might have adverse consequences on the economy and businesses. When the economy fails, many companies will close done, and employees will be rendered jobless. On the other hand, when the economy thrives, many businesses will thrive as well as increase employment opportunities so that as many people can secure employment.
Further, Trumble and Pattath, (2013) in their article about the rising costs of healthcare in America note a significant effect on employment opportunities given that many employers will trade employment opportunities with the increasing cost of healthcare to cover their current employees at the expense of growing the business to higher levels and offering other jobless individuals an employment opportunity.
Recommendations
While many research works have been conducted about the potential impact of employee benefits and economic aspects of society, the cost of managing healthcare remains steadfast and increasing by the day. Employers are likely to trade other benefits for healthcare with the inherent laws that require their adherence to the code where health factors of their employees are concerned. Additionally, the imminent laws that prohibit hospitals from trading quality healthcare service to the people for reducing their costs also hinder the service providers from engaging constructively, thus working with other service providers that might have profitable returns as opposed to the civil servants. Based on the research works done on the subject and the literature review above, this research paper could make the following recommendations.
Firstly, employees will need to engage in office-based physical activities to reduce chances of contracting lifestyle-related illnesses and improve their health altogether. Moreover, employers need to create a conducive environment and working schedule that will allow employees to engage in physical activities. Most importantly, employers should implement the florbetapir –PET of AD has proven to be cost-effective in reducing the amount of money spent on employee health cover and compensation to reduce the overall amount of their healthcare expenditure.
Secondly, the government needs to reduce the number of laws that make service delivery stringent that some stakeholders seek for some loopholes to avoid adherence to the legal standards. Moreover, the government should reduce the legally required fees for the employer and employee contributions as it would encourage employers to offer more benefits to their employees.
Thirdly, employers will need to engage in more cooperation with other interested stakeholders to subsidize the cost of healthcare. By so doing, they will manage to reduce the amount required to pay for the services as well as that of the employee. Furthermore, eeduced expenses for the employees will lead to higher levels of job satisfaction, thus leading to lower rates of turnover and higher productivity. Therefore, employers need to design strategies to ensure higher satisfaction levels for their companies.
Conclusion
The increasing cost of healthcare put employers in a tricky position as they face the dilemma to handle several requirements for the organization to remain in operation. Statistics show that healthcare costs increase lead to an increase of 30 percent of the overall healthcare cover that institutions need to maintain for their employees. While the rate of inflation is much higher than expected, it leads to businesses having to strategize financially for operational purposes. The Affordable Healthcare Act seeks to reduce the burden of healthcare from the shoulders of ordinary people. Institutions are required to ensure their workforce have a health insurance cover that can enable them to access quality healthcare services at any given time of their need.
The rising healthcare insurance premiums have been a significant contributor to the increasing cost of health care services since the inception of the Medicare and Medicaid services in America. Besides the insurance premiums, the Ambulatory costs have been on the increase by double since Medicare and Medicaid services implementation in America. Moreover, employers are required to increase their resources by at least 30 percent to cover the rise in the healthcare costs for their employees accordingly. Since employees are required to pay an equal sum of money towards their healthcare cover, thus their healthcare expenses are going to increase by at least 30 percent, it is essential to ensure that the recommendations above are taken into account and implemented fully.
Moreover, Employers will need to engage in more cooperation with other interested stakeholders to subsidize the cost of healthcare. Interested stakeholders contribute some reasonable amount channeled to the healthcare docket in the form of grants, subsidies, and reduced cost of medical services from manufacturing to the retail points. By so doing, they will manage to reduce the amount required to pay for the services as well as that of the employee. Once the employers and the relevant sponsors agree on sharing responsibilities to reduce the burden from the clients’ shoulders, the product will interest the workers to put more effort into their work. Reduced expenses for the employees will lead to higher levels of job satisfaction, thus leading to lower rates of turnover and higher productivity. Therefore, employers need to design strategies to ensure higher satisfaction levels for their companies.
References
- Anand, P. (2013). Essays in health and labor economics. Dissertation Abstracts International Section A: Humanities and Social Sciences, 74(5-A(E)), No-Specified. Retrieved from http://ovidsp.ovid.com/ovidweb.cgi?T=JS&PAGE=reference&D=psyc10&NEWS=N&AN=2013-99210-440
- Cooper, R. W., & Gardner, L. A. (2016). Extensive Changes and Major Challenges Encountered in Health Insurance Markets under the Affordable Care Act. Journal of Financial Service Professionals, 70(5), 53–71. Retrieved from https://search-ebscohost-com.library.esc.edu/login.aspx?direct=true&db=bth&AN=117675169&site=eds-live
- Duggan, M., Goda, G. S., & Jackson, E. (2019). The Effects of the Affordable Care Act on Health Insurance Coverage and Labor Market Outcomes. National Tax Journal, 72(2), 261–322. https://doi-org.library.esc.edu/10.17310/ntj.2019.2.01
- Gombocz, E. A. (2013). Changing the model in Pharma and Healthcare - Can we afford to wait any longer? In Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics) (Vol. 7970 LNBI, pp. 1–22). https://doi.org/10.1007/978-3-642-39437-9_1
- Gorin, S. H., & Moniz, C. (2017). An Affordable Care Act Update: Can the Republicans Really Reform It? Health & Social Work, 42(2), 69–70. https://doi-org.library.esc.edu/10.1093/hsw/hlx014
- HHS. About the ACA. (2019). Retrieved 27 July 2019, from https://www.hhs.gov/healthcare/about-the-aca/index.html
- Himmelstein, D. U., Lawless, R. M., Thorne, D., Foohey, P., & Woolhandler, S. (2019). Medical Bankruptcy: Still Common Despite the Affordable Care Act. American Journal of Public Health, 109(3), 431–433. https://doi-org.library.esc.edu/10.2105/AJPH.2018.304901
- Hornberger, J., Michalopoulos, S., Dai, M., Andrade, P., Dilla, T., & Happich, M. (2015). Cost-effectiveness of Florbetapir-PET in Alzheimer’s disease: A Spanish societal perspective. The Journal of Mental Health Policy and Economics, 18(2), 63–73.
- Kaye, H. S. (2019). Disability-Related Disparities in Access to Health Care Before (2008–2010) and After (2015–2017) the Affordable Care Act. American Journal of Public Health, 109(7), 1015–1021. https://doi-org.library.esc.edu/10.2105/AJPH.2019.305056
- Larg, A., Moss, J. R., & Spurrier, N. (2019). Relative contribution of overweight and obesity to rising public hospital in-patient expenditure in South Australia. Australian Health Review, 43(2), 148–156. https://doi-org.library.esc.edu/10.1071/AH17147
- Loney, T., Carter, J. M., & Linnane, D. (2012). The active workplace programme: An initiative to increase physical activity in office-based employees. Society of Petroleum Engineers (SPE). https://doi.org/10.2118/152441-ms
- Trumble, R., & Pattath, P. (2013). Rising Healthcare Costs - Challenges and options for businesses. Journal of Compensation & Benefits, 29(6), 19–27. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=92610125&site=ehost-live
- Vogenberg, R., & Santilli, J. (2018). Healthcare Trends for 2018. American Health & Drug Benefits, 11(1), 48–54. Retrieved from https://search-ebscohost-com.library.esc.edu/login.aspx?direct=true&db=rzh&AN=128026730&site=eds-live
- Vu, M., White, A., Kelley, V. P., Kuca Hopper, J., & Liu, C. (2016). Hospital and Health Plan Partnerships: The Affordable Care Act’s Impact on Promoting Health and Wellness... [including commentary by F. Randy Vogenberg]. American Health & Drug Benefits, 9(5), 269–278. Retrieved from https://search-ebscohost-com.library.esc.edu/login.aspx?direct=true&db=rzh&AN=117396462&site=eds-live
- Warshawsky, M. J. (2017). The Implications of the Rapidly Rising Cost of Employer-Provided Health Insurance for Earnings Inequality. Benefits Quarterly, 33(3), 52–62. Retrieved from https://search-ebscohost-com.library.esc.edu/login.aspx?direct=true&db=bth&AN=124438606
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