68 Performance Management Statistics for 2024
Elevate your performance management strategies with essential statistics. Stay ahead in optimizing productivity, engagement, and success in the workplace.
In This Post:
Expert Contributors:
Ebnu Sudarso
Co-Founder of Milkwhale
Brandon Wilkes
Marketing Manager at The Big Phone Store
Andre Oentoro
CEO & Founder of Breadnbeyond
Patricia J. Goldsmith
Chief Executive Officer of CancerCare
Rebecca Madsen
Chief Consumer Officer at UnitedHealthcare
CJ Xia
VP of Marketing & Sales at Boster Biological Technology
Hasmik Karapetyan
PMHNP, MSN, RN at Gloria Detox and Rehab Center
Dr. Michael K. Newman
CEO & Plastic Surgeon
Tiffany Payne
Head of Content at Pharmacy Online
Natasha Rei
Digital Marketing Manager of Explainerd
The budgeted healthcare cost for companies in the U.S. is $13,020 per employee.
A recent analysis published by Aon reveals that employer health expenses could increase by 6.5% in 2023, rising to an overall cost of $13,800 per employee.
As a comparison, the research also showed that between 2021 and 2022, the employer cost of healthcare plans increased by 3.7%, while employee premiums noticed a modest growth of 0.6%.
With the recent inflationary cost pressures, the price is bound to go up in the upcoming years.
A report issued by the McKinsey Global Institute estimates that the annual US national health expenditure is likely to be $370 billion higher by 2027 compared to the projections before the COVID-19 pandemic.
In the long run, this financial toll on employers could affect the quality of their employees’ healthcare packages.
Businesses should focus on finding a balance between the two to prevent this from happening, ultimately leading to better employee care.
The co-founder of Milkwhale, Ebnu Sudarso, believes that lower costs and improved healthcare quality can lead to a happier workforce.
Sudarso explains: “Healthcare is expensive, and for those with limited financial resources, it can cost them an arm and a leg just to afford basic healthcare.
”As an employer, I would love it if healthcare costs were lower and healthcare quality was improved. It would give employees more benefits, leading to a happier working environment and better well-being.”
Ebnu Sudarso
Co-Founder of Milkwhale
In times of such high economic uncertainty and an increasing cost of living, employers should ensure the well-being of their workers without hurting the business’s prosperity.
The question that ensues is how they can do this.
This Shortlister article tackles the challenge by exploring the possibilities of reducing healthcare costs for employers and analyzing recent data, trends, and expert advice on the topic.
The Employer Cost of Healthcare
The employer cost of healthcare is rising, affecting both companies and their workers.
According to research by the Kaiser Family Foundation, almost half of the U.S. population, or 49%, excluding the elderly, receive employer-sponsored health insurance.
The findings show a growing trend in premiums over the past decade.
For example, family coverage has noticed a growth of 47%.
In 2021, on average, a single coverage cost $7,739, while family plans were $22,221, an increase of 4% compared to the previous year.
Although these numbers fluctuate based on several factors, it’s evident that Americans spend a tremendous amount of money on healthcare.
As reported by the Journal of the American Medical Association (JAMA), five key factors are associated with the increase in healthcare costs since 1996, including
- Medical service price and intensity
- Population increase
- Aging of the overall population
- Disease prevalence or incidence
- Use of medical services
More than 50% of the expansion in cost was due to service price and intensity, including the overall rise of pharmaceutical drug prices.
The fear of the continuous increase of group health plans might cause employers to reduce their payments at the expense of the quality of the service they provide to their workers.
However, that might be counterproductive, leaving an unsatisfied workforce and decreasing retention.
A 2020 Work Retention report by the Work Institute states that replacing an employee costs 33% of their annual salary or $15,000 for someone earning a median salary of $45,000.
Investing money in the well-being of a current employee through a high-quality health plan is the more reasonable and, often, less costly choice.
Brandon Wilkes, Marketing Manager at The Big Phone Store, agrees that the employer cost of healthcare is a significant concern.
However, Wilkes also believes that this should not be the only factor determining the quality of care, saying: “Just because a healthcare provider charges more for their services does not necessarily mean they are providing a higher quality of care.
Many other factors need to be considered when determining the quality of care, such as the experience and training of the provider, the type of equipment and facilities available, and the overall reputation of the healthcare provider.
With that said, it is important to weigh all of these factors when deciding on your healthcare.”
How to Reduce Healthcare Costs for Employers?
Companies can opt for various methods to reduce employer healthcare costs without jeopardizing the quality employees receive.
As Andre Oentoro, CEO & Founder of Breadnbeyond would say, “One way to reduce costs is to offer employees incentives for healthy living. This can include discounts on gym memberships, fitness classes, and healthy food options.
Or, employers can ensure that employees have access to quality healthcare. This can be done by offering them a high-deductible health insurance plan.
This type of plan will allow your employees to save money on their monthly premiums while still getting the coverage they need.”
Oentoro’s recommendations are just one approach to tackling the challenge.
There are, however, other ways that we’ll explore further in this article.
How to Shop for Group Health Plans?
One of the best ways to save up on a group health plan is by not choosing the cheapest one but making a savvy choice.
Ultimately investing in healthcare is a business strategy.
Hence, the first step would be to set up the key points.
To gain insight into the overall coverage costs of a group health plan, employers should analyze what would work best based on the number of workers in the company.
For example, according to the Affordable Care Act (ACA), large applicable employers to ACA are legally bound to provide health insurance to full-time employees. Otherwise, they’re in for a hefty penalty.
The exception to this rule is small business owners with less than 50 full-time workers.
Yet, that doesn’t exempt smaller organizations from providing a solid health benefits package since failing to do this could make them less competitive in the job market.
Although they’re not legally obliged, small business owners can opt for an alternative option, or a “small group health insurance” if they have between two and 50 employees.
The second step in choosing a plan for all company sizes is understanding what they’re getting. But, more importantly, what they’re offering to their workers.
Hence, they can either weigh their options, contact a local business association and ask for recommendations, or consult an accountant or financial advisor.
Once it’s down to a few alternatives, employers can proceed by comparing plans and prices, ideally to cut down costs without reducing the plan benefits.
This process should also answer the following questions:
- Does the plan cover the essential health benefits of the Affordable Care Act, including hospitalization, prescription drugs, and maternity care?
- What is the actual cost of premiums, deductibles, and out-of-pocket maximums?
- Is there an extensive network of healthcare providers?
- Does it fit their employees’ current needs?
Patricia J. Goldsmith, Chief Executive Officer of CancerCare, advises employers to keep an eye on the following things to save money:
- “Keep copays and deductibles low, so employees don’t rack up medical debt or decline and/or stop needed treatments due to out-of-pocket costs. High deductible plans have been shown to discourage preventive services as well as medical care and treatment and delay the diagnosis of metastatic cancers.
- Limit the use of pre-authorization, a requirement that certain services, treatments, or prescriptions be approved in advance by the insurer, to only those treatments frequently abused or misprescribed.
- Steer clear of step therapy for chronic and severe conditions. It requires using a less expensive and often less effective medicine before a more expensive and often more effective one is authorized. Delays in getting the proper treatment can lead to costly and disruptive side effects or ineffective and possibly harmful treatment caused by the wrong medicine.
- Count all copays paid by or on behalf of a patient toward their deductible and out-of-pocket maximum. Employees who depend on expensive specialty drugs may need financial assistance to help with their copays, and they shouldn’t be penalized by having to cover their copays and deductibles twice.”
Finally, employers can switch to non-traditional health coverage like self-funded plans, level funding, or Health Reimbursement Arrangements (HRAs) if a standard group health insurance is not their optimal choice.
HRAs allow them to reimburse employees for their health insurance coverage and to qualify for medical expenses without paying taxes. That could help workers get an individual health insurance plan that works best for them.
Evaluate What Employees Need & Want
The workforce is diverse. It’s unreasonable to expect that a one-fits-all approach would benefit all equally. Therefore, companies should offer flexible options.
The demographic and past utilization of healthcare packages can be an initial indicator of what these options should be.
However, going the extra mile to provide the best employee benefits means transparent communication and regular surveys to evaluate what the workers want and show their medical priorities.
As a result, this will reduce costs on unnecessary benefits and leave resources for an employee-specific benefits package.
For example, for younger and healthier employees, a high-deductible plan option combined with a health saving account (HSA) might work better, while for those prone to health risks, a low-deductible plan with a flexible spending account (FSA) would be a better option.
Regardless of the approach, employees must know what they’re getting.
For Rebecca Madsen, Chief Consumer Officer at UnitedHealthcare, one strategy to cut healthcare costs is to use transparency tools.
Madsen believes that: “Empowering people with more information about their care options may help them make more informed decisions — and ones that could help save money.
Consider sharing the value of disease-specific support groups or providing employees with digital tools for evaluating providers, comparison-shopping treatment options, and estimating medical service costs.
For instance, some health plans enable people to comparison-shop for health care based on quality and cost, with estimates customized based on their own health plan.”
As another helpful piece of advice for both employees and employers, she mentions enhanced advocacy resources that, according to Madsen, can lower the total cost of medical care by up to 4% per year.
“Consider a strong advocacy program for guiding people through the complexities of the health care system.
For instance, UnitedHealthcare’s advocacy programs go beyond basic customer service and use advanced data algorithms to develop a deeper understanding of individuals and their needs, including any possible social barriers to health, to deliver personalized guidance.
The goals of this enhanced advocacy include
- A simpler employee experience.
- More cost-effective health decisions.
- Connection to relevant clinical programs.
- An understanding of lower-cost options.
- Awareness of community resources”.
The Quality of Care
“A product or service possesses quality if it helps somebody and enjoys a good and sustainable market.” – W. Edward Deming.
As one of the Founding Fathers of the Total Quality Management philosophy, Deming believed that organizations that focus on improving quality would automatically reduce costs. In contrast, those that focus on cost containment would reduce quality, leading to increased expenses.
But when it comes to people’s health, the quality of care ultimately depends on individual goals and the priorities of patients, their families, healthcare providers, regulators, insurers, and employers. These don’t always align.
Hence, an expensive healthcare plan could but doesn’t always mean higher quality.
Dr. Michael K. Newman, CEO & Plastic Surgeon, acknowledges a correlation between the two due to the nature of his work.
Newman explains: “As a boutique healthcare provider, I recognize that quality care comes at a price, and there is no sense in trying to skimp on resources just to increase my bottom line.
I want to give the best service I can to my clients.
To do that, I invest heavily in the best equipment, resources, and people. That comes at a cost, and cutting down on those would mean sacrificing the quality of care we are known for. So instead of reducing costs, we focus on working with high-value clients who can afford to part with their money in exchange for our services.
It’s easier to stay small but profitable instead of trying to be accessible to everyone but watering down the quality of care.
I do recognize, however, that this does not apply to all practices, especially those where access can mean life or death to underserved sectors, but in plastic surgery, that’s the way it is.”
Overall, the relationship between cost and quality is exceptionally complex. But by using a prevention-over-cure strategy and applying Deming’s quality philosophy, employers could save up money in the long run.
The quality of healthcare plans could reduce employee absenteeism, prevent chronic conditions from developing, and reduce complications by offering the right healthcare services at the right time.
Pharmacy Strategies & Overall Costs
Most employer-sponsored plans include some prescription drug benefits, making employers the largest payers of prescription drugs.
Three types of pharmacy plans exist:
- Prescription coverage with a copay.
- Prescription coverage after meeting an annual deductible.
- Coverage with separate deductibles for prescription drugs.
But they can be pretty expensive for employers and employees alike.
Therefore, using pharmacy strategies can be highly beneficial for employers in reducing the cost of healthcare.
CJ Xia, VP of Marketing and Sales at Boster Biological Technology, agrees with this sentiment.
“Of course, using pharmacy strategies is extremely helpful for reducing the healthcare cost of employees.
Pharmacy strategies include identifying the use of medicine first and then finding the best alternative to expensive drugs.
Many companies are making high-quality drugs at a super reasonable price. So, it’s better to use low-budget high-quality medicines when needed.”
An older study by the Trinity Regional Health System in Rock Island shows that the right approach could save millions of dollars.
Faced with increasing healthcare costs, the medical facility began a comprehensive assessment of its pharmacy operations and saved almost $2 million in pharmacy expenses.
They did this by using cheaper and lower quantities of medications, raising physicians’ awareness of inefficient utilization practices. For example, they found that they could switch an expensive chemotherapy drug costing $2,665 per dose with a less costly but clinically equivalent cure for $249.
Hasmik Karapetyan, PMHNP, MSN, RN at Gloria Detox and Rehab Center, adds a few other pointers.
“Pharmacy strategies are one of the most effective ways to reduce healthcare costs. They help prevent and manage chronic diseases that are expensive to treat.
Pharmacy strategies can be used in various ways:
- Preventative care: Provides patients with regular check-ups and screenings, which helps with the early detection and prevention of diseases.
- Disease management: Includes disease prevention, treatment, and rehabilitation programs for patients who have been diagnosed with specific diseases.
- Health promotion: Includes patient education programs that teach patients about their disease risk factors and what they can do to reduce them”.
Overall, pharmacy strategies affect the total cost of healthcare, but they are so intricate and specific. In this case, it’s vital to coordinate all cost management efforts to keep employees safe without compromising the quality of care.
Integrated Wellness
Wellness programs have an enormous exploring potential.
An analysis of a comprehensive wellness program’s impact on job satisfaction in the workplace shows that participating in such programs increases or maintains the employees’ job satisfaction levels.
Furthermore, research by Washington University in St. Louis revealed that wellness programs improved employees’ health, increased productivity by 11%, and had a return on investment of 76%.
They promote healthier habits, improve mental and physical health, and can significantly incentivize workers and their productivity, reducing burnout.
But how do they cut down employer healthcare costs?
One way is to move away from the traditional fee-for-service model and towards a value-based model, says Natasha Rei, Digital Marketing Manager of Explainerd.
According to Rei, “In this type of system, providers are paid based on the quality of care they deliver rather than the number of services rendered. That encourages providers to focus on preventive care and early detection, which can ultimately save lives and money.
Another way to reduce healthcare costs is to encourage employees to be more proactive about their own health. This can be done by offering incentives for employees to quit smoking, lose weight, or participate in other healthy activities.”
Tiffany Payne, Head of Content at PharmacyOnline explains that wellness initiatives motivate staff to adopt healthy lifestyle choices to improve their general well-being.
Payne adds: “Programs for stress management, nutritional guidance, physical activity plans, and health examinations are a few examples. The focus is on prevention in this case.
By doing this, you reduce the need for future expensive medical care. More crucially, wellness initiatives can increase employee satisfaction, fidelity, and output while lowering absenteeism.”
A study published by the Centers for Disease Control and Prevention (CDC) explored the relationship between” Inadequate physical activity and healthcare expenditures in the United States,” revealing a significant difference in healthcare expenditures in passive and active adults.
The findings show that people who don’t exercise will spend $5,813 per year on healthcare costs, which is $737 more than those who exercise between 0 and 150 minutes per week, and $1,313 more than those who spend more than 150 minutes weekly.
One of the strategies Brandon Wilkes uses to reduce employer healthcare costs in The Big Phone Store is wellness programs.
Wilkes says: “One of the most effective measures has been to offer employees incentives to participate in wellness programs. These programs help employees to maintain their health and avoid costly medical procedures.
We have also implemented a program of regular health screenings for all employees. That helps to identify potential health problems early when they are most easily treated.
In addition, we have a comprehensive employee assistance program that provides support and resources for employees dealing with personal or family health issues.”
A RAND study titled “Do Workplace Wellness Programs Save Employers Money” shows the correlation between employee programs and minimizing healthcare costs.
It’s also exemplary of what employees can do, depending on their goals.
For example, the study suggests that lifestyle management programs are a good investment for improving long-term employee health and productivity.
However, companies should focus on disease management programs that help workers manage their chronic diseases if they want immediate and high ROIs.
Self-Funded Plans
Some employers choose alternative insurance or a self-funded healthcare plan when premiums get too high.
It’s a non-traditional type of employee health insurance in which the employer is responsible and pays for its employees’ healthcare costs rather than purchasing a policy.
It controls costs by funding claims directly, without an insurance company as a middleman, and without additional costs associated with fully-funded insurance like premiums, profit margins, and administrative costs.
Although it can save employers a lot of money, a self-funded plan is a significant risk.
Unlike group health plans, there aren’t fixed premiums, and employers are responsible for their employees’ healthcare costs.
There is a way around the risk. Employers can opt for a funny insured or an uninsured self-funded plan. With the first one, part of the risk falls on the insurance company, and the employer is not liable for any costs exceeding the insurance policy amount.
Before turning to this alternative, employers must consider the risks and all other aspects of self-funding. Despite having the potential to significantly cut down employer healthcare costs, it can also be a massive undertaking.
Level Funding
Level funding is a self-funded plan that, to some extent, mitigates this health plan’s potential risks and unpredictability.
As a hybrid, it bares similarities to both full-funded and self-funded plans.
So, one of its best features is that it limits the risk of losing money on more extensive claims. However, the main disadvantages are the additional administrative requirements that fully insured plans don’t have.
In its simplest form, this health insurance plan allows the employee to pay a fixed monthly premium to cover the insured’s medical expenses.
The premiums are delivered to an insurance carrier or Third-Party Administrator (TPA), which collects them into an account to cover all costs with level funding, including employee health claims, stop-loss coverage premiums, and administrative costs.
The monthly premiums depend on the “worst-case” medical cost projections of the insured, and the employer can adjust the price as these expectations change.
If the claims are higher, there’s a stop-loss policy mitigating the risks.
The employer can get a refund if the claims are lower than initially predicted.
Employees & Benefit Decisions
Employees should have a saying in the employer’s benefit decisions.
A recent health benefits survey by McKinsey Global Institute reveals increased employee interest. Namely, the proportion of workers considering benefits as “very important” improved by 11% compared to their pre-pandemic appeal.
For 78% of employers, offering at least one voluntary benefit is essential to support their employees’ well-being.
The survey report also reveals that dental, vision and short-term disability were the most critical nonmedical benefits.
For a company to optimize its benefits package spending while making it more appealing to its workers, it must acknowledge their everyone has a different healthcare journey.
For that, personalizing the benefits selection and including employees in the decision process can be an excellent way for both parties to get what they want.
The Total Cost of Care
Employers can’t put a price tag on their employee’s health.
But they can estimate their expenditures using a simple formula.
Cost of care = premiums + deductibles + out-of-pocket costs + copayments (if any)
If the employer has received any vendor discounts, they should reduce it from the total sum. For example, employers who are part of the free Shortlister Platform can get vendor discounts, thus reducing a portion of the overall financial burden.
However, predicting the actual cost is much more complex, especially in the long term.
To get a rough estimate, employers should also consider their efforts to improve the well-being of their employees and any approach they take to reduce the overall expenses, including the quality of care they provide.
For Hasmik Karapetyan: “The total cost of care is not just a number that shows how much money you are spending on your health. It’s also the quality of care that you are receiving.
The total cost of care is the average amount spent on healthcare for a specific period, while the quality of care refers to how good the healthcare service is and how well it meets your needs.”
On a Final Note
While predicting or calculating expenses is a multilayered process, the solution to reducing the total cost of care lies in good management.
Willis Towers Watson’s Annual Best Practices in Health Care Employer 2020 Survey estimated that employers who best manage their healthcare cost trends could save up to $1,373 per employee per year.
This potential saving opportunity is reason enough for employers to weigh their options. However, in the long run, they should always prioritize their employees’ well-being and their business’s prosperity.
Written by Shortlister Editorial Team
Sources
- Aon: U.S. Employer Health Care Costs Projected To Increase 6.5 Percent Next Year
- The Gathering Storm: The Transformative Impact of Inflation on the Healthcare Sector
- 2020 Retention Report
- Factors Associated With Increases in US Health Care Spending, 1996-2013
- 2021 Employer Health Benefits Survey
- Affordable Care Act Tax Provisions for Employers
- Lessons From Deming: Profits, Pragmatism, and the Possibilities of Possessing Other Eyes
- 2020 Employer Health Benefits Survey
- Reducing Pharmacy Costs Through Improved Utilization
- Do Workplace Wellness Programs Save Employers Money?
- Inadequate Physical Activity and Health Care Expenditures in the United States
- Hidden Benefits of Corporate Wellness Programs
- Analysis of a Comprehensive Wellness Program’s Impact on Job Satisfaction in the Workplace
- Employers Look to Expand Health Benefits While Managing Medical Costs
- Making Health Care Affordable and Controlling Costs
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