6 Reasons Why Healthcare Costs Are Rising For Businesses


The steady increase in healthcare costs has long been a concern for businesses as well as their employees. There are a number of factors that account for this. From an aging population to rising prescription costs, to an increase in chronic illnesses like diabetes and high blood pressure, healthcare costs are driven up and businesses scramble to find plans that their employees can afford. Several dominant trends are at play here.


1. The Baby Boomer population is getting older – and growing.


As the Baby Boomer generation ages, it continues to grow. This increase in individuals over 65 years old means an increase in medical services. Two of the primary causes of increased healthcare spending are population growth (23%) and an aging population (12%).

The older the population is, the more likely they are to seek healthcare. As more people seek healthcare, the more expensive the healthcare becomes. This is just a logical progression. As people age, they tend to have more problems with their health which can result in more doctor’s visits.


2. Chronic Illness is on the rise.

Illnesses like diabetes, hypertension, heart disease, and other chronic conditions are becoming more widespread. While many of these diseases are lifestyle related and preventable, there are a number of factors that contribute to these conditions. A growing cause is access to care. Unfortunately, there are still many people who are uninsured or underinsured. This, coupled with rising medication costs, presents a barrier to appropriate healthcare.

The result is a surge of people flooding to hospitals with both emergency and non-emergency issues. Emergency departments are designed to address acute needs, not ongoing or long-term care for chronic issues. So, while an asthma attack or extremely high blood sugar can be handled in the ER, the care ends when the crisis is over. Ideally, the patient should follow up with their primary care physician to get proper care.

Bottom line, increased costs for ongoing care of chronic conditions coupled with rising treatment and medication costs inhibit access to treatment. This gives room for conditions to progress. Furthermore, those with a predisposition for certain conditions are sometimes left unable to afford preventative treatment.

According to a 2017 report by the American Medical Association, the conditions that prompted the biggest increase in cost include:

  • $64.4 billion – Diabetes
  • $57.2 billion – Neck and lower back pain
  • $46.6 billion – High blood pressure
  • $41.9 billion – High cholesterol
  • $30.8 billion – Depression
  • $26 billion – Falls
  • $30.2 billion – Urinary disease
  • $29.9 billion – Osteoarthritis

As the Boomer generation ages into that bracket, costs will continue to rise. And so the vicious cycle continues.


3. Ambulatory costs are steadily increasing.

Ambulatory care, urgent care clinics, and standalone outpatient clinics are becoming more prevalent. They are being presented as a more affordable solution for uninsured or underinsured patients who have non-acute or non-emergent conditions although they are popular for those even with good insurance because the wait time is usually shorter. The uptick in patients seeking non-emergent ambulatory care has resulted in costs rising.

While clinics are increasing in popularity, the traditional emergency room is still alive and well. Many ERs across the country are still struggling with extremely long wait times, bed shortages, and crowded waiting rooms. A rapidly growing elderly population paired with the sharp increase in chronic disease are two leading contributors to the mounting costs of ambulatory care. At its core, it is simply a matter of supply and demand – the higher the demand, the shorter the supply and the greater the value.



4. Prescription drug costs are getting higher.

Prescription drug costs have been rising for years. For some, the costs have risen to a point where some people can no longer afford even necessary prescriptions to manage chronic illnesses like diabetes and hypertension.

Why are we seeing this? Well, there are several reasons that drug prices are increasing. One of the most significant is the lack of transparency. As insurance companies negotiate copays at a fixed cost, drug companies are driving up the price to get bigger commissions. This keeps patients in the dark about the true cost of the medications they take.  Another cause is the lack of competition in the industry. Patents protect name brand drugs from competitors that offer cheaper generic medications.


5. Out-of-pocket costs are getting higher too.

The out-of-pocket costs that Americans are paying for treatment, medication and medical care is steadily increasing. This is due, in part, to a rise in High Deductible Health Plans (HDHP). This drives up copays, deductibles, and coinsurance. Families can sometimes find themselves paying tens of thousands of dollars in deductibles.

Why is this happening?

Some cite a rise in chronic illness as at least part of the problem. It’s a delicate balance for many who are trying to find a plan that covers the equipment, medication, and supplies they need to manage their specific ailment. Even over-the-counter medications can be cost-prohibitive when patients treating a chronic illness, like migraines, are unable to afford the prescription medication needed to prevent attacks or relieve pain. They are then forced to turn to OTC medications or herbal supplements in an effort to get relief.


6. Patients avoid healthcare.

As the costs for treatment, doctor’s visits, and medication have risen, more people are opting to avoid medical care completely. Most do it simply because they don’t want the bills that come with that care. The price is simply too steep for them.

The problem with people avoiding the doctor and delaying care due to cost concerns is when the condition deteriorates (and health problems often do when left untreated) the patient ends up sicker. This generally results in more extensive and more expensive care than they would have needed had they been able to get preventative care or seek treatment earlier in the illness.

When companies are able to identify the reasons behind increasing healthcare cost, it can empower them to identify ways to offset or even reduce those expenditures. They can then focus on finding ways to build better plans with lower price points. Ready for more cost-friendly solutions? You can download our free checklist “8 Ways to Reduce Employee Benefits Costs without Compromising Coverage”.



Let the professionals at ESIS help you find the right benefits programs for your business. Visit our website to learn more and browse our blog to find valuable information on employee benefits and management best practices.

Contact us today or schedule a call to learn more.