With healthcare costs climbing, small business owners are navigating difficult choices between competitive wages and sustainable benefits plans.

In today’s challenging business environment, healthcare costs are becoming an increasingly difficult hurdle for small business owners. A recent study, the *2024 “Pulse of the Purchaser” survey* by the National Alliance of Healthcare Purchaser Coalitions, highlights how the rising costs of healthcare are affecting employers’ ability to offer wage increases, and this impact is especially significant for small businesses. As you work to build competitive employee benefits plans, it’s crucial to weigh the tough decisions you may face regarding costs, salaries, and overall business sustainability.

The study revealed that a staggering 74% of employers feel healthcare costs directly force trade-offs with wage or salary increases. For small businesses already working with limited budgets, this can lead to difficult choices: how to keep benefits attractive without compromising on wages that retain skilled employees.

Here’s a closer look at what’s driving healthcare costs:

Prescription Drug Prices: According to the survey, 99% of employers view rising drug costs as a significant threat to affordability. For small businesses, adjusting formularies to include more affordable, generic options or leveraging biosimilars can help offset these costs. Additionally, transparent pharmacy benefit managers (PBMs) may provide small businesses with more control over costs by offering clear contracting and pricing.

High-Cost Claims and Hospital Expenses: High-cost claims are another significant concern, with 84% of employers noting their impact. Options like enhanced screening programs and promoting early detection can help reduce high-cost claims in the long term. For small businesses, partnering with healthcare provider networks that emphasize preventive care or offering managed disease programs through their insurer can help mitigate risks associated with high-cost claims.

With 72% of the survey’s employers indirectly tied to the “big three” PBMs—CVS Caremark, Express Scripts, or Optum Rx—through their fully self insured plans, its hard for them directly to impact the delivery of prescriptions. This year we are seeing a significant disruption in the ways that insurance plans are distributing drugs, with the Amazon Blue Shield collaboration as a prime example of the changes in RX delivery.

Unfortunately, there are few tools that small employers can use to directly impact the actual claims. Large carrier network reimbursements are key to driving down costs and ultimately premiums.

For small businesses in Los Angeles, the balance between providing competitive compensation and sustainable healthcare benefits can be critical for long-term success. According to the survey, rising costs in healthcare have made benefits not just a financial issue but a “survival” issue for businesses. Exploring flexible benefits options and building sustainable health and wellness programs are two impactful strategies for supporting your team without overextending your budget.

In navigating these challenges, working closely with a your CorpStrat benefits advisor can also make a significant difference. By helping you identify practical solutions to control healthcare costs, they can be a valuable partner in balancing cost control with your business’s retention and recruitment goals.

With the right strategies, small businesses can continue to thrive by providing meaningful benefits that support their employees’ well-being, while managing costs effectively.