As health care costs continue to trend in the wrong direction, a different tenor of conversation has emerged, forging a new dialogue between human resources leaders and the C-suite. This is most true for chief financial officers, who are increasingly involving themselves in decisions related to benefits. HR is being invited to take a seat at the table. Unfortunately, it’s a hot one.
Projected health care cost trend jumped to almost 8% for 2025, the highest amount in more than a decade, according to Business Group on Health’s 2025 Employer Health Care Strategy Survey. This has captured the attention of leadership like never before.
A recent CFO survey by Mercer underscores how closely executives are evaluating health benefits moving forward. In this survey, over two-thirds of CFOs viewed health benefit cost as a "significant" or "very significant" concern compared to other operating expenses.
At the same time, the majority of CFOs stated they did not have confidence or information to prove that their organization’s long-term cost management strategies were actually saving money.
CFOs are prioritizing cost management strategies. Survey respondents showed the greatest interest in clinical management, followed by network strategies, then plan design changes.
Investment decisions will be scrutinized more closely as budgets get tighter. Quite simply, benefits are now a top-of-desk item for CFOs, who are having to weigh rising costs against investment in infrastructure for growth. As a result, HR departments should be preparing to field new types of questions from company leaders.
6 Emerging Questions to Field From Your CFO
- What are we actively doing to manage our health care spend?
- How do we know we are getting the best care at the best prices for our employees?
- How do we gain more insight into our costs?
- Are we getting the value we should from our current plans?
- How can we partner with health care providers to reduce our spend?
- Are there alternative models we should be considering?
The traditional approaches to benefits are no longer viable in this new reality. Historically, the focus was on minimizing disruption for employees, reducing administrative burden on the HR department, deploying one-size-fits-all solutions to ensure consistent and equitable support for all employees, and relying heavily on health plan partners to keep costs at bay.
It's time for this mentality to shift. We have to be open to alternative models. We have to find ways to take advantage of local innovation, instead of unwieldy and inconsistent national networks. Instead of avoiding disruption, we have to help employees navigate necessary change while ensuring that change is put into clear context for them. And we must hold all partners—vendors, providers, consultants, health plans—more accountable for delivering creative solutions that drive real value.
To drive this point home, some companies are even rethinking what types of skills are needed for HR leadership. One large organization re-assigned a cost reduction specialist as their vice president of Total Rewards, because its leadership believed a different mentality was needed to respond to rising health care costs. The CFO is coming in to help, and if HR leaders are not prepared to collaborate effectively and adjust their approach, they could find themselves in danger of losing their position altogether. It’s a classic case of “adapt or die."
In addition to preparing for a different level of engagement with the C-suite, how can HR leaders succeed in this new environment? How do you take steps to shore up your cost containment strategies while effectively responding to the increasing demands? We'll dive deeper into these questions in our next article. Stay tuned, or contact our team today to discuss winning strategies: employersolutions@vumc.org or (615) 421–0112.