Employers continue to emphasize benefits even with projected increase
“Because health plans typically have multi-year contracts with health care providers, we haven’t felt the full effect of price inflation in health plan cost increases yet,” says Sunit Patel, Mercer’s chief actuary for health and benefits.
U.S. employers expect per-employee health benefit costs to rise by an average of 5.6% in 2023, according to early results from Mercer’s National Survey of Employer-Sponsored Health Plans 2022. Although the projected increase is higher than the 4.4% increase projected for this year, it lags the overall inflation rate, which is near 9%.
“Because health plans typically have multi-year contracts with health care providers, we haven’t felt the full effect of price inflation in health plan cost increases yet,” says Sunit Patel, Mercer’s chief actuary for health and benefits. “Rather, it will be phased in over the next few years as contracts come up for renewal and providers negotiate higher reimbursement levels. Employers have a small window to get out in front of sharper increases coming in 2024 from the cumulative effect of current inflationary pressures.”
The projected increase reflects changes that employers plan to make to hold down costs. If they made no changes, respondents indicated that the cost for their largest medical plan would rise by an average of 7%.
The survey asked employers to rate nine benefit strategies in terms of their importance over the next three to five years. “Enhancing benefits to improve attraction and retention” came out on top, with 84% of large employers rating it important or very important. It’s an even higher priority than “monitoring and managing high-cost claimants,” which was second this year but historically tops the list.
Many employers are looking to expand behavioral health benefits. Nearly three-fourths of large respondents say improving access to behavioral health care will be a priority over the next few years. Another area of concern is health care affordability. Despite rising costs, the majority of employers will not take cost-saving measures that shift health care expense to employees, such as raising deductibles or copays. Only 36% of survey respondents are making cost-cutting changes in 2023, down from 40% in 2022 and 47% in 2021.
Employers also will not increase employees’ share of the cost of coverage in 2023. Among large employers responding to the survey, employees will be required to pick up an average of 22% of total health plan premium costs in 2023 through paycheck deductions.
“In today’s environment of record-breaking inflation and widespread labor shortages, employers face a really tough balancing act,” says Tracy Watts, Mercer’s national leader of U.S. health policy. “They must manage rising health care costs while making smart decisions about how to attract and retain the workers they need. For now, we are seeing the majority of employers prioritizing attractive benefits.”