The Stuff of CFO Nightmares
One-third of CFOs now consider rising healthcare costs to be a top-three priority. Are there any answers?
The nightmares of CFOs used to involve financial-reporting data errors, or inflation gone wild, or sudden tariffs that spike sourcing costs. This year, the topic that’s keeping CFOs up at night is different: It’s healthcare prices.
One-third of CFOs now rank healthcare costs as a top-three priority, up from 19% last year, ac-cording to a new survey of 161 finance leaders. Call it a CFO’s new preexisting condition. “It’s a squeeze that is hard to address, without a lot of great options,” says Jeff Constable, co-leader of the Global Financial Officers practice at Korn Ferry.
The sleepless nights come at a time when health costs were set to rise by nearly 9%—a figure that firms have managed to lower to an average of 6.5% by tweaking their health plans. (Over the past few decades, 3% annual increases have been typical.) Only a quarter of CFOs say that their firms have been able to absorb benefits-related cost increases over the past two years with-out experiencing business impacts. In recent years, most firms have responded by reducing spending on other benefits and lowering wage growth, as well as by displacing more costs onto employees. As a result, healthcare costs are a leading topic for CEOs and boards alike.
The risk is not benign. Nationally, health spending is expected to account for 18.6% of the US GDP in 2026, according to the Centers for Medicare and Medicaid Services. “Healthcare costs are cutting into corporate profitability,” says Scott Sette, senior client partner in the Global Healthcare Services Practice at Korn Ferry.
CFOs are accustomed to managing corporate expenses of all kinds. But healthcare costs are different—an albatross spilling over from another industry. Unlike most other line items, they’re neither forecastable, nor primarily under the company’s control. Functionally, healthcare costs are a big question mark. “It’s the volatility that keeps them up at night,” says Beau Lambert, senior client partner in the Financial Officers practice at Korn Ferry.
As a result, the power dynamics across executive suites are shifting. Many firms have reassigned responsibility for healthcare from the benefits committee to the operations committee; some CFOs have taken to befriending CHROs in order to better forecast and influence out-comes. What used to be a twice-yearly discussion with HR is now a daily topic.
CFOs’ options are limited. Many feel that they’ve pulled the lever as much as they can on cost sharing with employees. “Cost shifting has limits,” says Lambert. Thus begins the tricky task of trying to absorb costs. For CFOs, the challenge is how to solve one expense line with-out creating hidden costs elsewhere.
“The low-hanging fruit has been done already,” says Lisa Harrison, associate client partner at Korn Ferry in the Healthcare advisory practice. “The hard changes now have to hap-pen.” This means structural changes, such as enterprise decisions that require alignment from the health clinic to the board. “CFOs can’t force that,” she says, “but they can strongly influence it.”
Experts advise financial officers to seek as much data as possible—which requires navigating patient-privacy regulations. But the data provides a full understanding of where dollars are being used, which parts of benefit plans can be tweaked, and how to forecast ongoing claims. “I’ve heard a lot about it this year—it’s not slowing down at all,” says Lambert.
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