In the year 1970, per capita annual health care costs averaged around $1,848 (in today’s dollars). In 2019, that number increased to $11,582.
Over the last forty years, this increase in health care costs has reached the pockets of employers—on average health care costs are more expensive now than they have ever been before.
This change has led company CFO’s to take a much more active and expended role in health plan design. In this post, we’ll discuss this trend.
Specifically, we’ll talk about:
- The Ongoing and Increasing Trend of CFO Involvement in Health Plan Design
- What Is Causing This Trend
- What Should Business Leaders Do About This
The data covered in this article was collected by cutting-edge benefits firms that collectively support thousands of employers across the U.S.
The Ongoing and Increasing Trend of CFO Involvement in Health Plan Design
A recent survey has produced significant evidence that supports the idea that CFO involvement in health plan design will continue to increase. Consider the following findings from the survey:
- Over the past three years, only 32% of organizations have made changes to manage health care costs. However, 55% of organizations expect to make changes over the next three years.
- 74% of business leaders indicate that their finance department has had an active role in making decisions related to their health care program over the last three years. However, this number increases to 87% when asked if their finance department will have an active role in the health care program over the next three years.
- 48% of business leaders stated that their finance and HR departments shared responsibility for the organization’s overall health care management and strategy over the last three years. When asked the same question about what they expect over the next three years, the number increased to 58%.
The data is clear. Health care costs are increasing, and organizations will be making changes in the near-term future to adapt. These changes will involve an increased role of the CFO (and the finance department in general) in the management of the organization’s health care program.
What Is Causing This Trend
The driving forces behind the trend explained in the previous section are both simple and complex at the same time.
From a simple perspective, the trend is being caused by a decades-long increase in health care costs for employers. In order for company leadership to manage the rising costs of their health care plan, they must instruct the CFO and the finance department to have an increased role in decisions related to the plan.
However, recent events have made this trend even more complex. The COVID-19 pandemic has created many questions about the future of health care around the globe and the associated costs. Unfortunately, many of these questions remain unanswered. CFOs must become increasingly involved in health care plan management in order to brace for whatever storm lies ahead in the industry.
What Should Business Leaders Do About This Trend?
It may seem as if an increased role of the CFO in what has traditionally been an HR realm will be sure to cause contention within many organizations. The minds of CFOs and HR managers functions differently, there is no doubt about that.
Fortunately, there are many trusted sources of support to help organizations adapt to these structural and responsibility changes.
According to findings from the same survey that was cited earlier, “Nearly all employers think strategic conversations and innovative solutions are valuable in their relationship with a consultant or broker.” In other words, business leaders are becoming increasingly willing to work with benefits consultants and brokers to help them navigate the uncertain future of the health care industry.
The following solutions which are traditionally provided by benefits consultants and brokers were specifically mentioned in the survey:
- Innovative solutions
- Strategic conversations
- Market developments and industry trends
- Actuarial and financial advice
- Fully bundled services and solutions
Business leaders who took the survey overwhelmingly indicated that they will find significant value in discussing the above items with benefits consultants or brokers moving forward.
If you and your business find yourself in need of a more hands-on benefits consultant, be sure that you know what to look for when considering different options. Consider the following tips:
- Make sure the broker offers services that can be adapted to your specific needs and business model.
- Consider the broker’s approach to cost-savings. Will they offer your business cutting-edge plan design options in order to control benefits spend?
- Take a close look at the pricing model of the consultant or broker. Do they work on a commission or fee only basis?
Health care costs are increasing, both for individuals as well as businesses. A result of this trend is that company CFOs and finance departments are becoming increasingly involved with the management and decisions related to the company’s health care program. As we soon will enter the post-pandemic world, there is much uncertainty related to what effect the lingering effects of COVID-19 will have on the global health care system. Due to this uncertainty, it will become even more important for the CFOs to be involved moving forward. Businesses can adapt to this trend in healthy ways by working with a more hands-on benefits broker.