Employers Expect a 4.7% Increase in Health Benefit Costs for 2022 as They Focus on Improving Employee Benefits Rather Than Cost-Cutting, Mercer Survey Finds

NEW YORK--(BUSINESS WIRE)-- Employers expect health benefit cost to rise 4.7% on average in 2022 compared to 2021, according to early results from Mercer’s National Survey of Employer-Sponsored Health Plans 2021. The increase, based on 1,502 employer responses since mid-June, is largely in line with the average annual cost growth in recent years except for a dip in 2020 as many people delayed or went without care in the early months of the pandemic (see Figure 1).

Employers expect a 4.7% increase in health benefit costs for 2022 as they focus on improving employee benefits rather than cost-cutting, Mercer survey finds (Graphic: Business Wire)

Employer-sponsored health plans face many unknowns in developing cost projections for 2022. According to Sunit Patel, Mercer’s chief actuary for health and benefits, “One issue is that people have been deferring or cancelling care for the past two years and, while that lowers cost in the short term, it can increase cost over the longer term when medical conditions are diagnosed later or left untreated for too long. It’s also difficult to make assumptions about the cost for COVID-related care – particularly long COVID – and for expensive new gene therapies. On top of that, healthcare prices are being impacted by labor shortages, wage inflation, supply constraints and the new transparency requirements. So it’s not surprising that we’re seeing wide variations in cost projections for next year.”

Cost management takes a back seat to the need to support employees

Last year, as disruptions in healthcare utilization held down cost growth, fewer employers than usual took cost-savings measures that shift healthcare expense to employees, such as raising deductibles or copays. That trend is continuing, despite healthcare utilization and spending beginning to return to pre-COVID levels. The percentage of employers making these types of cost-shifting changes to their plans has fallen again, with only 38% making changes to shift cost in their medical plans in 2022, down from 47% that chose not to shift cost in 2021.

In addition, employers on average will not increase employees’ share of the cost of coverage in 2022. On average, employees will pick up 22% of total health plan premium costs in 2022, unchanged from 2021. Among the largest employers (those with 20,000 or more employees), nearly a third (32%) will actually decrease the share of the premium contributed by employees in 2022, while only 17% will increase it.

“Employers understand that healthcare affordability is a real issue for many employees, especially for lower-wage workers,” said Tracy Watts, Mercer’s National Leader for Healthcare Policy. “They are looking at a range of strategies that will keep more money in employees’ paychecks and remove cost barriers when care is needed.”

For some employers, especially the largest, improving affordability for lower-wage workers is part of a longer-term focus on addressing health inequities and the social determinants of health. Half of all respondents with 500 or more employees -- and 65% of those with 20,000 or more employees – say this will be an important or very important priority over the next three to five years.

Addressing the needs of today’s workforce with virtual care

The pandemic has proven that providers and patients will embrace virtual care once they try it. Many health plan members began having virtual visits with their own providers, and utilization of traditional telemedicine programs offered by employers, like Teladoc or MDLive, essentially doubled from an average of 9% of employees using it in 2019 to 17% using it in 2020 (among respondents with 500 or more employees). Importantly, Mercer’s recent Health on Demand survey of 2,000 US workers found that the great majority of employees who tried telemedicine for the first time during the pandemic said they intend to keep using it.

With more employees working remotely, employers are turning to a broader range of options to support workers who will no longer have access to worksite-based offerings such as subsidized healthy food choices in cafeterias or onsite gyms. About a fifth of survey respondents (21%) say that in 2022 they will add or enhance well-being initiatives that are targeted specifically to remote workers, for example, home delivery of meals or snacks, subsidized ergonomic office furniture, or a stipend to help pay for well-being services or activities.

Further, 25% of employers say they are emphasizing virtual care strategies to address potential provider access issues that remote workers may face, especially those who live farther from urban areas. “Employers are taking advantage of the explosion in virtual care services to offer primary care, chronic condition management, and behavioral health care that is more affordable, accessible and convenient,” says Ms. Watts.

Behavioral health care at the top of the agenda

With one-quarter of US workers reporting they feel “highly” or “extremely” stressed in their everyday lives, employers have made behavioral healthcare a priority. In 2021, 76% of survey respondents with 500 or more employees say that addressing employees’ mental and emotional health will be a top priority over the next 3-5 years – that compares to just 44% that considered it a priority in Mercer’s 2019 survey. Here again, virtual care solutions have a key role to play. Currently, 30% of survey respondents provide employees with a virtual behavioral healthcare option, often through specialized programs such as Lyra, Ginger, etc., and another 21% are considering it.

“These programs have made a big difference by removing geographic barriers to provider access and improving engagement with more affordable pricing and the convenience of virtual care from anywhere – with no travel time needed,” says Ms. Watts.

The complete survey results, based on responses from more than 1,700 public and private employers across a wide range of industries, will be released later this year. It will provide the actual cost increase for 2021 and look at the full range of strategies employers are using to support employees and manage health benefits cost. The survey was conducted over the summer and closed in September.

About Mercer

Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 78,000 colleagues and annual revenue of over $18 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit mercer.com. Follow Mercer on LinkedIn and Twitter

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Micaela McPadden

201-694-9719

Micaela.mcpadden@mercer.com

Source: Mercer