Health Benefit Cost Expected to Rise 5.4% in 2024, Mercer Survey Finds
- Employers are implementing cost-management strategies for complex care and chronic medical conditions, such as Centers of Excellence and healthcare navigation services.
- None.
The estimate suggests that last year’s high inflation and labor shortages in the healthcare industry have pushed healthcare costs higher, contributing to higher health benefit costs. The projected increase comes after more than a decade of annual cost increases typically averaging 3 to
What’s pushing cost up
According to Sunit Patel, Chief Actuary for Health and Benefits, Mercer, “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.”
Mr. Patel added, “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.”
The projected increase of
The survey found that during the past five years, many large employers (500 or more employees) have avoided the cost-management tactic of shifting costs to employees, as evidenced by minimal growth in deductibles and other cost-sharing requirements.
Mr. Patel continued, “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. This also contributes to faster health plan cost growth.”
Smaller employers with 50-499 employees – that typically have fully insured plans – reported a higher average initial renewal rate of
What may be tempering cost growth
“Considering the economic environment, projected health benefit cost increases could have been worse,” said Tracy Watts, National Leader of US Health Policy, 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.”
Many large employers have added Centers of Excellence (COEs) to health plan networks that steer members to higher-quality providers for complex care, and according to a separate Mercer survey conducted earlier this year,
Additionally,
These types of interventions – which lead to better outcomes for the patient – also tend to save money for the plan as a result.
Employers are balancing enhancements and cost
Each year, the survey asks large employers to rate benefit strategies in terms of their importance over the next three to five years. Last year, “enhancing benefits to improve attraction and retention” came out on top. This year, it dropped to second place as labor market challenges have eased and employers are focusing on the rising cost of healthcare.
Large employers are now most likely to rate “monitoring and managing high-cost claimants” as important or very important over the next few years. Based on Mercer’s experience, this generally translates to a shift in focus toward helping patients with complex conditions access the best possible care.
About two-thirds (
About Mercer’s National Survey of Employer-Sponsored Health Plans 2023
The 2023 National Survey of Employer-Sponsored Health Plans was launched on June 12. The preliminary results discussed above are based on responses from over 1,700 employers that responded through August 14; over 1,900 employers ultimately participated. The final survey results will be released in the fall of 2023.
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 more than 85,000 colleagues and annual revenue of over
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Cassie Lenski
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Source: Mercer