Employer health-care costs are expected to rise by an average of 6.4% this year. This marks the next milestone in a steady upward trend for employers’ annual health-care coverage spending. As costs continue to climb year-over-year, CFOs must develop business strategies for long-term health-care savings, including leveraging their 2025 health-plan design process to proactively address areas of concern. How can business leaders better understand their specific cost drivers and intercept issues before they affect their bottom lines?
For most companies, cancer is the costliest piece of their health-care puzzle. It’s the best place for CFOs to start.
The Levers Behind Rising Costs
Health-care cost inflation has always been a multiple of general inflation. Most of this generation’s CFOs, human resources leaders, and benefits managers have never experienced health-care rates this high and are troubled by mid-year health-care costs that run far above their expected budgets. But why are employer health-care costs suddenly soaring higher than ever before?
We tend to feel the effects of health-care cost inflation after those of general inflation. This delay is due to the timing of price negotiations. Insurers and providers navigate contracts and costs only once every several years, meaning employers may see incremental jumps in prices and spending as contracts shift.
COVID-19 exacerbated this trend in two major ways. First, it created a health-care labor crisis that could cost the industry $170 billion by 2027. Second, the pandemic delayed normal preventive care practices for millions of people. Where many Americans would normally receive routine screenings to identify breast, colorectal, cervical, endometrial, lung, and prostate cancers as early as possible, screening rates dipped by more than 80% for some cancers in 2020 and have been slow to recover.
Delayed screenings lead to a greater proportion of late-stage cancer diagnoses, for which survival rates are significantly lower. And costs skyrocket. Treating cancer diagnosed at stage IV can cost three times more than if the disease was caught at stage I. Therapies like CAR-T, which are used to treat advanced cancer, carry up to a million-dollar price tag. Put in the context of overall inflation, health-care cost inflation, and the already high cost of cancer treatment, the fact that 41% of employers expect to see more late-stage cancer diagnoses is cause for concern.
Reducing Cancer Costs Is a Top Priority
In 2023, 86% of employers reported cancer as their largest health-care expense — surpassing musculoskeletal conditions, cardiovascular disease, and diabetes. Many are seeing late-stage cancer diagnoses showing up more and more in their claims data.
During the 2025 health plan design process, reducing the burden of cancer — for the coming year and the future — should be top of mind for business leaders. But this prospect raises tough questions: What does cancer actually cost your business? What drives cancer spend higher, and is the increase leading to improved outcomes? What can you do to bring costs down?
In today’s climate, using employee screening rates to project the potential impact of cancer on your business is an important workforce strategy metric for shaping a healthy financial future. By understanding what portion of the employee base has been screened, they can more accurately plan and predict health-care spend, and its impact on the balance sheet, in the year ahead.
Manage Cancer Costs Like a Business
Today’s CFO needs a multi-faceted, proactive approach to cancer. Too many businesses focus on cost control at the point of treatment, which is important, but not the best place to start. The only way to get ahead of the year-over-year cost increases in cancer care is to make sure your employees get diagnosed early.
You can shape health-care decisions within your organizations by prioritizing proven, cost-effective investments. This is where guideline-based screenings come in — and you can directly ensure employees get them.
With benefits programs that deliver multi-cancer screening and prevention to employees, you can help catch cancer earlier and guide at-risk individuals to cost-effective resources for the next step in care.
Health care is a 24/7 cost management challenge and should be handled as such. CFOs should receive monthly updates from their health insurer to understand how costs are running versus the company's annual operating plan and the health insurer's book of business. Both are important to forecast whether health-care inflation is higher than expected.
Finance and human resources teams should push all their health-care partners for proactive recommendations on mitigating costs throughout the year and build a contingency plan with tactics they can implement to offset budget overrides. Specific to cancer, CFOs can make screenings more convenient and accessible for employees to receive and mitigate the coming cost increase.
Othman Laraki is CEO of Color Health and Brian Marcotte is the past CEO of the Business Group on Health.