The past year has been in the hands of employees, with low unemployment and companies competing for workers. This led to the rise of digital healthcare providers that offered employers benefits to help them attract employees.
That dynamic is likely to change in 2023, predicts Ellen Herlacher, director of LRVHealth. As possible recession is looming, the unemployment rate is likely to rise, meaning employers won’t have to work as hard to find workers. That means they will likely cut back on the digital health companies they work with, and technology providers will really have to prove their value in reducing costs, Herlacher said.
“These employers don’t necessarily have to compete so fiercely for employees,” she said in an interview. “You may start to see some of these things fall away because employers probably won’t be as interested in this next thing that allows them to continue to gain employees, but it can stay on the list if it’s doing a good job managing medical costs.”
Employers will also look for high-engagement digital health companies, Herlacher said.
“[Vendors are] will have to prove that if they are to the employees [employee assistance program] or platform that employees are finding them and using them and actually seeing a benefit from them,” she said. “But if they’re just sitting there gathering dust on a platform, or if they’re not really moving the needle on health care spending, I think we’re going to start to see some of these things go away.”
Herlacher’s comments were echoed by Drew Hodgson, healthcare delivery and national practice leader at Willis Towers Watson.
“Employers are saying, ‘You have to prove to me that this will actually reduce costs for us because we’re not going to implement programs that will potentially increase costs in the marketplace,'” Hodgson said.
He added that as employers grapple with solution fatigue, there is likely to be a lot of consolidation in the digital health space in the coming year.
Although there were threats of a recession, Hodgson said he did not believe it would be anything significant. Health care is a different story though, like medical inflation it usually goes higher than traditional inflation rates and there tends to be a slowdown in health care prices, he said. Healthcare has also experienced challenges from the Covid-19 pandemic, which have increased costs, such as supply issues and labor shortages.
In the past, employers sometimes passed the cost on to employees. But those days are over, Hodgson said. And even if the world doesn’t go into recession, employers can’t continue to absorb those costs and need another solution, he added.
“Employers today are looking to say, ‘We have to shrink the whole pie and reduce overall spending.’ I think that pressure is on employers in 2023 and 2024, whether we have a recession or not,” he said.
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