Employer-provided health insurance is about to get much more expensive
Preliminary results are in for Mercer's National Survey of Employer-Sponsored Health Plans for 2023 – and it looks like health insurance premiums are subject to the same inflation as consumer goods and food.
The survey reveals that employers are anticipating a 5.4% increase in total health benefit costs per employee in 2024. The survey, which drew responses from over 1,700 employers, highlights the ongoing challenges in managing healthcare expenses. This projection comes despite employers implementing changes to their healthcare plans aimed at slowing down cost growth. Respondents indicated the cost for medical plans would have increased by an average of 6.6% if not for cost-cutting measures.
The 5.4% growth rate is significantly higher than the typical annual increases of 3-4% witnessed over the past decade. According to Mercer, several factors have contributed to this upward trend, including labor shortages, the ongoing merger of health systems and costly new therapies.
In the past five years, many large employers with 500 or more employees have avoided shifting costs to employees, as evident from minimal growth in deductibles and cost-sharing requirements. Some employers even absorbed cost increases during the pandemic, further contributing to the growth in health plan costs.
“Smaller employers – those with 50-499 employees, that typically have fully insured plans – reported a higher average initial renewal rate of 7.5%. But cost increases can vary significantly from one employer to the next, regardless of size,” the authors wrote in the report. “About one-fourth of respondents reported that, without making changes, medical plan cost would rise by 10% or more, while a similar percentage (29%) expected a cost increase of 4% or less – including 12% that expected flat costs or a decrease.”
In light of inflation over the last couple of years, employers have increasingly implemented longer-term cost-management strategies that focus on improving patient outcomes rather than shifting costs to employees. Employers are striving to meet changing needs, with behavioral health care remaining a strong area of interest. Over 76% of large employers plan to improve access to behavioral health care in the coming years by expanding Employee Assistance Programs (EAP) services and adding virtual behavioral health care options.
Despite these cost management measures, employees' share of the cost of coverage will remain largely unchanged in 2024. On average, employees will be required to contribute 22% of the total health plan premium costs through paycheck deductions, consistent with 2023 and 2022 figures. However, 15% of large employers will still offer employees free coverage in at least one medical plan in 2024, up from 11% in 2023.
The final results of Mercer's National Survey of Employer-Sponsored Health Plans for 2023 will be released in the fall, providing further insights into the evolving landscape of employer-sponsored healthcare benefits.
More information about the survey can be found here.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.