“Even after taking into account changes US-based employers made to healthcare plans that are designed to slow cost growth, employers expect total health benefit cost per employee to rise 5.4% on average in 2024,” according to the preliminary results of Mercer’s 2023 National Survey of Employer-Sponsored Health Plans.
The survey from the benefits consultant is based on responses from more than 1,700 employers from June 12 to Aug. 14. It also finds that “the projected increase comes after more than a decade of annual cost increases typically averaging 3 to 4%.” The final survey results will be rolled out this fall.
“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, Mercer’s chief actuary for health and benefits. “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.” GLP-1 are medications that help reduce blood sugar levels and promote weight loss.
If employers made no changes to contain costs, respondents estimate that the cost of their biggest medical plan would go up an average of 6.6%. Nearly 70% of large employers say they are prioritizing strategies to make healthcare more affordable for their workers over the next few years. Employers, overall, will not pass on a higher share of costs to their staff next year, with big companies planning to have their employees pay an average of 22% of the entire health plan premium costs via salary deductions. That would be the same as this year and 2022.
Another benefit consultant, Aon, projects employer healthcare costs to increase to 8.5%, with one percentage point to come solely from weight-loss drugs, Reuters reports.
Employers are tapping into artificial intelligence for help in trimming administrative staff costs, say consultants Mercer, Aon and Willis Towers Watson. They and insurers are also looking for hospital networks that are not as pricey for some procedures. “Employees are given incentive that says if you go here, you pay less,” says Janet Faircloth, senior vice president of Aon's health innovation team.
Another group notes that the average healthcare cost per employee grew from $15,862 in 2022 to $17,200 this year, Axios reports, citing the 2024 Large Employer Health Care Strategy Survey from the Business Group on Health. The survey collected responses from June 1 – July 18 from 152 large employers, 80% of who have more than 10,000 workers.
Mental health rated high for employers this year with 77% noting they saw increases in such concerns, including depression, anxiety and substance abuse. That compares with 44% last year, and employers' focus on mental health is expected to grow faster.
Half of survey respondents peg cancer as the top illness fueling higher healthcare costs, while 86% note it will be among their top three concerns. The survey also finds that 92% of employers are worried or very worried about expensive drugs.
“Those concerns appear to be well-founded, as employers experienced an increase in the median percentage of healthcare dollars spent on pharmacy, from 21% in 2021 to 24% in 2022,” the Business Group on Health notes in its executive summary.
The group projects the cost of healthcare may jump up 6% from this year to 2024, noting that is a bigger historical increase. It also notes that employers have reined in their expectations on how much of a game-changer virtual health will be in 2024. “Their changing views are due to concerns regarding whether or not all forms of virtual health result in positive impacts on outcomes, quality, cost, experience and integration,” the executive summary notes. “Employers are also concerned that there are too many virtual solutions, leading to market saturation, and too many choices for employees.”