Updated as of April 2023.
Inflation is breaking records that have stood for more than 40 years. And it’s not slowing down.
Based on numbers released by the U.S. Bureau of Labor Statistics in early June, the Consumer Price Index increased by 8.6% in May from a year earlier. It’s the largest 12-month increase dating back to December 1981.
Meanwhile, workers continue to lose more ground in terms of their earnings. The bureau also reported that rising inflation caused real average hourly earnings to decline by 3% from May 2021 to May 2022.
Inflation is squeezing everyone one way or another. And it’s forcing people to make tough choices about how they commute to work, which medications they fill, and whether they can find a job that pays just a little bit more.
With two positions open for every person seeking a job right now, employers that want to keep and attract valuable talent must find ways to relieve this financial stress.
Delayed Care Is Expensive Care
These increasing costs are making it harder for employees to access and afford the care they need. About 8% of consumer budgets went to healthcare last year, but only 3% will be available this year. And that wallet share is only getting smaller.
Whether they’re skipping a visit to the doctor, not refilling a prescription, or cutting back on therapy appointments, people are ignoring their healthcare needs today and planning to make up for it tomorrow. While any decision to compromise one’s well-being is problematic — potentially leading to increased turnover and absenteeism at work — it’s also compounding a vicious cycle of rising healthcare costs.
As out-of-pocket costs increase, people often delay or forgo care. This leads to larger claims down the road, which eventually work their way back to employees in the form of higher premiums and deductibles. And the cycle continues.
Think of someone who might have a small cavity in their tooth today. They might not have the $100 needed to cover the small filling today, so they put off that treatment until later. The problem? That $100 filling turns into a $1,000 root canal. And that doesn’t even factor in any lost productivity at work and the pain of dealing with more severe health issues. If you think about what this dynamic means for someone who has an unmanaged chronic condition like diabetes or depression, you can imagine the potential drain this creates on your workforce and your bottom line.
Employees depend on their employers to help them navigate these troubled waters. According to the TIAA 2022 Financial Wellness Survey, 51% of all respondents said employers have a responsibility to help employees with their financial wellness; among Gen Z respondents, 65% felt that way.
People expect their employers to act in their best interest, which means companies will have to put something in place to help their teams. Employees need tools that help alleviate financial stress so they can continue to perform at a high level professionally and personally.
The Cost of Doing Nothing
What can you do to help address this problem for your employees? You could try reducing your deductibles, giving employees raises, or contributing to a lifestyle account or HSA — but those solutions are expensive and can be challenging to implement.
The additional cost of new solutions and the extra effort involved in implementation are holding employers back from taking action for the moment. But everything has a cost — even doing nothing. Quantifying the impact of a new solution could help marshall support in your organization by balancing the cost of that solution against the opportunity cost of doing nothing.
To illustrate this, we turned to Paytient’s in-house expert on insurance and healthcare costs. J.R. Clark, our SVP of health plan product and strategy, spent 13 years as a director and actuary with Anthem Blue Cross Blue Shield and worked as an actuarial analyst in the retirement practice at Watson Wyatt Worldwide. We asked J.R. to help us look at how Paytient helps mitigate the growing costs associated with absenteeism, employee turnover, and deferred healthcare. For this hypothetical, we’ll assume your employees earn an average annual salary of $60,000.
The Cost of Absenteeism
It should come as no surprise, but absenteeism has a profound impact on your team’s productivity. After all, employees can’t get much work done if they’re not actually at work. The U.S. Bureau of Labor Statistics reports the average absence rate in 2021 was 3.2%, which means the average employee misses about eight workdays a year. Considering people with cost barriers to care take 70% more sick days than their peers, the average Paytient user would only take 4.7 sick days rather than the eight missed days for folks who don’t have Paytient.
A benefit like Paytient can drop absenteeism by encouraging your team to be more proactive about their health. Even if we were only able to reduce absenteeism by just under a single half day per every year — and the numbers above suggest a more significant impact — this reduced absenteeism would still result in a monthly savings of about $8.83 for an employee making average salary of $60,000 annually. In other words, doing nothing means you pay an opportunity cost of $8.83 per employee every month.
The Cost of Employee Turnover
Next, let’s take a look at turnover costs.
According to the Society for Human Resource Management, a company can expect to spend about six to nine months’ worth of an employee’s salary to advertise, recruit, hire, and train a replacement after someone leaves. To account for positions that might not take quite that long, we’re going with a ballpark estimate of three months’ worth of a given position’s salary.
If a benefit like Paytient could accomplish a 0.3% reduction in turnover — an incredibly conservative estimate given feedback from our members — that offset would equal a savings of $7.38 per employee per month. In this case, doing nothing carries a monthly opportunity cost of $7.38 per employee.
The Cost of Deferred Medical Care
Finally, there are costs associated with deferred care and prescription nonadherence — which can be tricky to measure because it initially looks like lower healthcare costs to the company.
Deferring proper care for chronic health conditions like asthma, diabetes, chronic back pain, or dyslipidemia can have a meaningful adverse impact on health outcomes and costs. Likewise, the impact of people not taking their medications as prescribed increases the number of inpatient admissions.
Our analysis assumed access to the right care at the right time could save 2% on healthcare costs for people with chronic health conditions, while taking medications as prescribed might reduce the 5.5% of commercially insured people that are admitted to the hospital each year for non-maternity reasons. After offsetting that savings with the increase in pharmacy spending per individual, we estimate a benefit like Paytient saves about $5.57 per employee per month — and doing nothing would cost you that much.
Add those costs together, and your opportunity cost is about $22 per employee per month to not implement a solution like Paytient to ease the pain in your team’s pockets. A benefit like Paytient costs only a few dollars per employee per month to implement, and it can deliver a massive win for employees while generating significant ROI.
With the opportunity cost in view, paying a nominal monthly fee per employee for a new solution with good ROI is a smart way to help your employees better access and afford care. And as a result, you’ll see fewer employee absences, reduced turnover, and lower long-term medical costs thanks to more proactive care. Paytient alleviates financial stress and empowers your employees to get the care they need to live healthy and productive lives.
