Employers expect to see their healthcare benefits costs per employee to rise about 5.4% in 2024 as high inflation, labor shortages and ongoing industry consolidation have pushed up costs, according to preliminary results of a new survey.
The estimated cost increase is more than 2 percentage points higher than the 3.2% increase that employers realized in 2022, according to consulting firm Mercer, which conducted its annual National Survey of Employer-Sponsored Health Plans from June 12 through Aug. 14 with 1,700 employers participating. The final survey results will be released later this year, Mercer said.
The survey also revealed that large employers expect employees to be required to pick up an average of 22% of total health plan premium costs through paycheck deductions in 2024, an unchanged amount since 2022. Employers overall will not increase their employees’ share of the cost of coverage next year, the survey found.
During the last five years, many large employers (those with 500 or more workers) avoided shifting costs to employees and absorbed the cost increases, as evidenced by minimal growth in deductibles and other cost-sharing requirements, Mercer said. Some 68% of large employers said that strategies to improve healthcare affordability for employees will be an important initiative over the next few years.
According to other recent reports, several factors are contributing to medical cost control, including the growth in outpatient care and telemedicine.
Biggest cost drivers are complex care and chronic conditions
“Considering the economic environment, projected health benefit cost increases could have been worse,” said Tracy Watts, national leader of US 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.”
The projected 5.4% increase comes after more than a decade of annual cost increases that usually averaged 3% to 4%, but it reflects changes that employers are planning to make to keep their costs down, Mercer said. If they make no changes to their existing health benefits, respondents indicated that their costs for their largest medical plan would increase by an average of 6.6%.
Sunit Patel, Mercer chief actuary for Health and Benefits, said factors pushing up costs include the introduction of ultra-expensive gene and cellular therapies. “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 said.
Take steps to control costs
According to the National Institutes of Health’s MedlinePlus service, there are a variety of ways to help you cut healthcare costs.
Those include getting routine health screenings to catch potential health problems early when they may be more easily treated, and using health advocate or case manager services offered by some health plans to help you get the most from your coverage.
Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.
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