As small and mid-sized businesses grapple with the high cost of health care, they are finding that there are no simple solutions. Nearly three-quarters of CEOs expect costs to climb at least 6%, and more than 10% expect an increase of more than 15%.
“As health care costs rise, CEOs must rethink their benefits strategies and redesign existing plans,” said Joe Galvin, chief research officer for Vistage Worldwide. “A range of alternative models now exist beyond the traditional fully funded approach. Many leaders are considering — or have already adopted — options such as self-insurance, captive insurance, level funded plans, PEOs and ICHRAs.”
Health care costs are just one of several challenges that CEOs face heading into the new year, the third-quarter Visage CEO Confidence Index survey found. Rising costs driven by growing inflation, higher interest rates and soaring energy prices have created a vicious cycle of escalating expenses and shrinking profit margins.
Although one-quarter of CEOs plan no changes to their health plans, 70% are either changing providers (24%) or seeking competitive bids while preferring to keep their current provider (46%). Many leaders have adopted or are considering such options as self-insurance, captive insurance, level funded plans, PEOs and ICHRAs.
“Moved to self-funded, increased focus on care management, wellbeing initiatives and transparency of costs,” said Robin Divine, president and CEO of TriCore Reference Laboratories in Albuquerque. “We plan to absorb the increase as much as possible.”
The overall confidence index fell to 80.8, which represents the third consecutive quarterly decline. Just 14% of CEOs said the economy had improved over the past year, while 46% reported that conditions had worsened compared to last year. Looking ahead, just 2 in 10 expect the economy to improve over the next 12 months.
At the same time, however, 6 in 10 CEOs expect revenue to grow, just below the 64% reported in the second quarter. Almost half expect profitability to improve, down a point from the previous quarter. These findings point to continued confidence in business growth, although rising costs persist. Protecting margins amid rising costs will require more than price increases and cost management.
“Key takeaway for CEOs — act now, rather than waiting for confidence to rebound,” Galvin said. “Tariffs, interest rates and energy costs won’t resolve on your schedule, so those protecting their margins, paying down debt and rebuilding health care strategies today will be best positioned when conditions improve. For this quarter, execution — not optimism — will set the winners apart.”