The Employer Dilemma: How to Confront the Rising Cost of Healthcare

First Installment of our Catalyst Series

Employee health insurance is a vital piece of an organization’s benefit structure that demonstrates a commitment to the company’s values, mission and the wellbeing of its people. A solid benefit package that includes employer-subsidized insurance is critical to attracting and maintaining top talent in an increasingly employee-friendly job market. Yet, the rising cost of healthcare is eroding margins and forcing many organizations to make trade-offs between its people and its future growth potential.

To make matters more complicated, over the last decade employers as the purchaser of healthcare have not realized increased value from the rising insurance costs. Instead, sicker employees require more frequent and often more complex healthcare services in a healthcare ecosystem that is not rewarding for outcomes. Based on the results of the 2018 DHG Employer Health Survey*, it was noted that the most deployed strategies for increasing quality and reducing cost were some of the least effective. This cost-benefit misalignment has reached a point of criticality where businesses must now turn to a new service and payment model that gathers the necessary stakeholders around a common vision: accessibility, quality care, employee engagement, and affordability.

part I
the story behind the numbers

First, the good news:
Over the last decade, medical and pharmaceutical advancements have reduced the per capita total cost of care significantly.1 Additionally, advancements in technologies, drug therapies, artificial intelligence and clinical trials have created new best practices and standards of care that have led to a further cost reduction and an improvement in the quality of outcomes. However, the cost to the purchaser and consumer continues to increase, with the average annual family healthcare premium expected to surpass $20,0002 in 2019. What’s the story behind the numbers that explains this phenomenon?

Average annual family healthcare premium expected to surpass $20,000 in 2019

We Have an Unhealthy Population: Over the last two decades, obesity rates in America have reached crisis levels and diabetes diagnoses have increased 68%3. Mental illness and substance abuse among employees has also increased, with 9.5% of the U.S. adult population suffering from a depressive illness which can cost employers $100 billion annually when left untreated. These conditions are often linked to poor diet, a lack of exercise and stress. This unhealthy lifestyle is not often considered a primary medical condition; however, it is a driving force and a precursor to future dangerous and costly conditions. Compounding the problem, a growing number of employees or their spouses are caring for an elderly or high needs relative. Research has shown that these individuals self-report as not being healthy and result as a higher cost members.4

Footnotes & References
  • This DHG Healthcare whitepaper is based on a survey and research project focused on better understanding the needs of one of the largest segments of healthcare purchasers. These purchasers are the CFOs and CHROs (Purchasers) of mid-market to large employers who offer self-insured employer-sponsored health insurance to their employees.
  1. Kaiser Family Foundation, 2018 Employer Health Benefits Survey
  2. Kaiser Family Foundation, 2018 Employer Health Benefits Survey
  3. CDC Diabetes Statistics
  4. AARP Public Policy Institute, Understanding the Impact of Family Caregiving on Work
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Kevin Locke
Managing Principal, Healthcare

Laurajeanne Fligor
Manager, DHG Healthcare

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