This past year was in the hands of employees, with unemployment rates low and companies competing for workers. This led to the rise of digital health vendors, who were offering employers benefits to help them attract employees.
That dynamic will likely shift going into 2023, predicts Ellen Herlacher, principal at LRVHealth. As a possible recession looms, the unemployment rate will likely rise, meaning employers won’t have to work as hard to find workers. That means they’ll likely be cutting down on the digital health companies they work with, and tech vendors will really have to prove their worth in reducing costs, Herlacher said.
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“These employers don’t necessarily have to compete as viciously for employees,” she said in an interview. “You might start to see some of that stuff fall down because employers probably are not going to be as interested in that next thing that allows them to continue to win out employees, but it can stay on the roster if it’s doing a good job of managing medical costs.”
Employers are also going to be looking for digital health companies with high engagement, Herlacher said.
“[Vendors are] going to need to prove that if they’re on the employees’ [employee assistance program] or platform, that employees are finding them and using them and actually seeing benefit from them,” she stated. “But if they’re just kind of sitting there collecting dust on a platform, or if they’re not really moving the needle on healthcare costs, I think we’re going to start to see some of those things go away.”
Herlacher’s comments were echoed by Drew Hodgson, healthcare delivery and national practice leader at Willis Towers Watson.
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“Employers are saying, ‘You need to prove to me that this is actually going to reduce costs for us because we’re not going to implement programs that are potentially going to increase cost in the market,’” Hodgson said.
He added that as employers battle point solution fatigue, there will likely be a lot of consolidation in the digital health space in the next year.
While there have been threats of a recession, Hodgson said he doesn’t believe that it will be anything significant. Still, healthcare is a different story, as medical inflation generally runs higher than traditional inflation rates, and there tends to be a lag with healthcare prices, he stated. Healthcare has also experienced challenges from the Covid-19 pandemic that have increased costs, such as supply issues and workforce shortages.
In the past, employers would sometimes shift costs to the employees. But those days are over, Hodgson said. And even if the world doesn’t go into a recession, employers can’t continue to absorb these costs and are in need of another solution, he added.
“Employers today are now looking at saying, ‘We have to shrink the whole pie and reduce overall cost.’ I think that pressure is on employers going into 2023 and 2024 whether we have a recession or not,” he said.
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