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Middle Market Firms Struggle to Overcome Healthcare Cost Challenges

A recent Deloitte survey asked middle-market executives to list their main impediments to U.S. growth. Rising healthcare costs came in second, after government budget challenges. And these increasing costs are having a challenging effect on midsized firms' overall margins.

Middle-market executives face numerous obstacles to growth while at the same addressing rising healthcare costs.

Zach Abrams, a manager with Capital Advisors Ltd. finds some firms report healthcare costs are rising up to 10% year-over-year. In attempts to keep costs low, they’re hiring consultants to uncover opportunities or are implementing in-house wellness programs. “This is really the main thing impacting their margins,” Abrams tells Crain’s Cleveland Business, adding “costs keep rising, and people just want to know when it’s going to end.”

“Some companies are good at reinvesting in employees, but it’s about helping them become better employees.”

Wells Fargo’s recent Employee Benefits Trend Survey illustrates the growing prominence of wellness programs. It finds that 93% of respondents expect an increase or improvement in the importance of wellness programs over the next five years. Half of the companies that have considered or are considering a change in wellness offerings said they are doing so as a result of the ACA, while 55% expect to put incentives and/or penalties in place this year for wellness compliance.

So, how can middle-market firms maintain their overall margins, given the expense of containing rising healthcare costs? “Based on the regulatory environment we’re in, it would be wise for businesses to understand they need to have a financial partner,” Ivo Tjan, president and CEO of CommerceWest Bank stated to Richard Franzi, host of the radio show Critical Mass for Business. “Middle market companies are after working capital, so executives need to get in front of commercial or business bankers. They can tear into your balance sheet and income statement [and] help you grow your company.”

Whether the solution is found in implementing in-house wellness programs, hiring consultants to lower healthcare costs or developing a strong relationship with a local commercial banker, it’s critical that executives maintain their firms’ margins and ultimately, develop and build their business.


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