- Employers expect health benefit costs per employee to rise 5.4% on average next year, according to preliminary findings released last week from consulting firm Mercer’s 2023 national survey of employer-sponsored health plans.
- High inflation and labor shortages contributed to the projected healthcare cost increases, according to the employer survey. The projected increase in 2024 is higher than the annual cost increases of the previous decade, which averaged 3% to 4%.
- Employers face the challenge of balancing improvements to benefit plans with cost reduction strategies. Surveyed employers indicated that, if they had not made efforts to cut costs, health benefits for their largest medical plans would rise by an average of 6.6%.
In addition to inflation and labor shortages, healthcare consolidation and the introduction of “ultra-expensive” gene and cellular therapies contributed to the increased cost projections, according to a statement on the survey results from Sunit Patel, chief actuary for health and benefits at Mercer.
“This year, we’re also starting to see the impact of a sudden jump in utilization of costly GLP-1 drugs being used to treat diabetes and obesity,” Patel added.
The Mercer survey is the latest to point to rising healthcare costs. In June, consultancy firm PwC predicted in its annual report that healthcare costs would rise by 7% in 2024 as drug costs climb and inflation drives providers to ask for rate increases from insurers.
Despite some executives’ efforts to cut costs, the “relatively small difference” between the size of the projected increase and the projected increase without cost-reduction strategies, shows that most employers are not cutting costs in their healthcare plans, according to a Mercer press release.
The report noted that during the last five years, many large employers have avoided cost-cutting strategies such as shifting costs onto employees. This is evidenced by the “minimal growth” in deductibles and other cost-sharing requirements.
“Many employer plan sponsors have chosen to absorb cost increases in recent years rather than ask employees to pay more out of pocket for healthcare,” Patel noted in a statement. “This also contributes to faster health plan cost growth.”
However, cost increases could have been worse considering the economic climate, according to Tracy Watts, national leader of U.S. health policy at Mercer.
“One factor may be that as employers have moved away from cost-shifting to employees, they’ve been implementing cost-management strategies directed at the biggest drivers of cost – complex care and chronic medical conditions,” Watts said in a statement.
For this year’s survey, the company pulled data from more than 1,700 employer respondents through Aug. 14. Mercer will release final results based on responses of more than 1,900 employers in December.