Organizations are increasingly tasking CFOs with managing employee healthcare costs while continuing to provide quality benefits, according to a survey by Willis Towers Watson, released Jan. 11.
Finance leaders are also becoming health care program decision-makers, the survey found, with 87% of CFOs saying they'll become involved with setting or reviewing specific decisions about their organization's health care program over the next three years. The survey was conducted in October, 2020.
Nearly three in five (58%) of surveyed CFOs said they'd share responsibility with HR, the department typically in charge of health care, regarding such decisions in the next three years.
Eighty-seven percent of the respondents said health care costs management would be a company priority over the next three years, a 15% jump from the same question in 2019.
While employees may consider a company's HR leader to be the point person on health care coverage and planning, the pandemic has moved the needle decidedly in the CFO's direction.
One-third of finance executives will maintain primary responsibility for their organization's overall health care cost management and strategy over the next three years, compared with 11% of HR executives.
This is likely due to the greatly increased cost of health care coverage amid and following the coronavirus pandemic, the research states.
Fifty-five percent of CFOs expect their employers to make significant changes to health care cost management over the next three years, compared with just 32% that made changes in the past three years; one in ten traced these changes back to COVID-19.
Almost all respondents expect their medical program costs to slightly increase over the next year, with an average prediction of a 5% jump.
As such, CFOs appear better positioned to meet the needs of their workforces in comparison to 2019, especially in driving innovative approaches to managing cost savings by accessing external expertise.
However, less than one quarter say they are well-positioned for predicting and managing health care cost volatility.
Healthcare management is moving more and more towards the finance department for many reasons, but mainly because health care programs are comprising more and more of a company's budget, and those costs tend to be pretty volatile, Alan Silver, senior director of health and benefits at Willis Towers Watson, told CFO Dive.
"Any time you've got increasing costs combined with volatility, you'll see finance become more and more involved," Silver said. "Even if costs are decreasing, CFOs hold budgeting and cash flow pretty sacred, and they don't love how volatile healthcare plans can be."
As the coronavirus pandemic continues, CFOs are trying to get a better understanding of the health care market, so they can better address the volatility within their companies, Silver said. In doing so, they have been increasingly partnering with HR.
Over the past three years, 48% of respondents said HR and finance shared primary responsibility for their organizations' overall health care cost management and strategy. Over the next three years, they anticipate that figure will grow to 58%.
Less than one quarter (22%) of respondents said their organization is well-positioned to predict and manage health care cost volatility.
"That's a problem and needs to be addressed," Silver said. "CFOs need to be intentional about what their programs are meant to accomplish."
Providing health care benefits are a "major expense," he added. "You need to make sure, if you're spending the money on them, you're meeting your employees' needs."