Employee medical costs continue to make up a large portion of labor costs. The average per-employee cost of employer-sponsored health insurance will increase by 5% this year to $16,500, and Mercer projects it will increase by 6% in 2025. Our 2025 CEO and Senior Executive Compensation Report shows even higher increases for the following companies: Top. ”
Pharmacy benefits are the fastest growing part of health care benefits, but recent decisions by major employers to expand coverage to include GLP-1 drugs (including obesity) and infertility treatments This is leading to increased costs.
The lack of talent in a tight labor market, combined with the need for companies to control costs from periods of inflation, puts CFOs in a difficult position. CFOs must not only keep health plan budgets in check, but also maintain benefit standards. Attractive to job seekers.
To find out how CFOs are dealing with these seemingly contradictory goals, we interviewed Quentin Pelser, CFO at Vitality Group, a health and wellness solutions provider for employers and individuals. Mr Pelser has worked in the industry for 25 years, starting out in accounting at Vitality's parent company in South Africa.
How can CFOs manage employee health costs without cutting benefits?
Premiums for employer-sponsored health insurance continue to rise significantly, often outpacing inflation. These are the second largest expense for most organizations after payroll. Accelerated innovation driving new treatments with high uptake and unit costs, such as GLP-1, is another reason these costs are on the CFO's radar.
According to research from the Integrated Benefits Institute, more than half of CFOs make all or most of their company's benefits decisions. The CFO plays a key role in managing this cost center. CFOs not only ensure health benefits are aligned with overall company strategy and goals, but also challenge the status quo in implementing cost containment measures to better understand expenses, utilization, and ROI. There is a need. Sometimes you need to ask important questions about plan partners and hidden fees. Finally, CFOs must instill compliance awareness in their teams to comply with regulations and deal with complex legal situations.
What are some of the positive benefits that CFOs can reap by spending their time and energy to make health benefits packages more cost-effective?
The impact a strong benefits package has on employee retention and recruitment can differentiate employers. Research shows that 80% of employees would rather have additional benefits than a raise. Mental health platforms and financial wellness initiatives are becoming integral parts of these packages for several reasons.
Wellness programs address employees' immediate needs and reduce long-term costs. They are also shifting their focus from disease care and disease management to preventive care and wellness. These programs can positively impact the health and well-being of employees and their families and increase the productivity and competitiveness of your organization.
What adjustments have CFOs made to advance business strategy since the COVID-19 pandemic?
Post-pandemic, organizations made fundamental changes to their operating models to encompass a variety of employee preferences, whether fully remote, in-office, or a combination of both. This change requires an increased focus on building a strong organizational culture with clear values.
On the strategic side, key adjustments to advance business strategy include increased use of scenario planning. Given increased volatility and uncertainty, CFOs need more scenario-based forecasting to prepare for a variety of potential outcomes and calculate necessary strategic adjustments.
To meet changing customer needs and improve operational efficiency, virtualized workplace operations must be near the top of an organization's digital transformation initiatives. Post-pandemic labor market changes require strategic talent management to meet critical talent needs. Tactically, this could involve hiring skilled workers from other organizations or hiring new graduates. Enhanced benefits are also on that list.
Investment decisions require a long-term perspective. CFOs must balance short-term goals that may address immediate financial pressures with investment initiatives that drive sustainable growth. The bar for investing post-pandemic has also been raised, as investors look for businesses with environmentally sustainable products and ideas.
