Mercer: Cost of Health Benefits To Jump 5.4% in 2024

Employers anticipate total health benefit costs per employee to increase 5.4% on average in 2024, new data from Mercer shows.

“In addition to the effects of recent inflationary pressures, health benefit costs are rising from the consolidation of health systems and the introduction of ultra-expensive gene and cellular therapies,” said Sunit Patel, chief actuary for health and benefits at Mercer, in a news release. “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.”

Mercer released preliminary findings from its 2023 National Survey of Employer-Sponsored Health Plans on Thursday. Final survey results will be released in the fall of 2023. The preliminary results include responses from more than 1,700 employers.

The 5.4% increase includes changes employers will make to health plans to mitigate cost increases. Without changes, health benefit costs would increase by 6.6% on average in 2024, the respondents reported.

“The relatively small difference between the size of the projected increases before and after plan changes indicates that most employers are not making cost-cutting changes to their plans, reflecting concerns about employee healthcare affordability,” the news release stated.

Smaller employers with 50 to 499 employees reported a higher anticipated increase of 7.5% in health benefit costs, Mercer also found. Employers of this size often have fully insured plans.

“It’s not surprising that fully insured plans would have somewhat higher increases,” Patel said. “Given the unpredictability of the healthcare market, insurance carriers are hedging their bets for next year.”

As health benefit costs increase, employers are still not looking to shift more of the costs onto employees, Mercer said. Large employers anticipate employees paying for 22% of health plan premium costs through paycheck deductions in 2024, which is the same as in 2023 and 2022. About 68% of large employers said that strategies to improve healthcare affordability for employees will be important for the next several years.

Still, while there is an expected increase in health benefit costs, it “could have been worse,” said 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.

In addition, when asked to rate benefit strategies based on importance over the next three to five years, employers were most likely to rate “monitoring and managing high-cost claimants” as important or very important. This usually means focusing on helping those with complex conditions, Mercer said.

Some ways employers are targeting complex care and chronic conditions is by adding Centers of Excellence to their networks, offering point solutions to employees with chronic conditions, providing navigation services and improving mental health access by adding supplemental behavioral healthcare provider networks. About 76% of respondents said improving behavioral healthcare access is a priority.

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