American employers estimate that the total health benefit cost per employee will hit a new decade high next year, according to a survey. However, as most companies prioritize improving healthcare affordability, they will likely absorb cost increases.
The total health benefit cost per employee is expected to rise 5.4% on average in 2024, even after companies change their plans to slow cost growth, according to a Mercer survey of over 1,700 employers. After more than a decade of annual cost increases typically averaging 3% to 4%.
Loren Adler, fellow and associate director at Brookings Schaeffer Initiative on Health Policy, says that one of the main drivers of the cost increases is rising hospital prices.
"Some of that is a catch-up from the recent years' inflation and cost growth in the hospital sector," he told Healthnews.
Labor shortages in the healthcare industry, consolidation of health systems, and the introduction of super-expensive gene and cellular therapies have also pushed the costs higher, the survey suggests.
Another factor is a sudden jump in utilization of costly diabetes and obesity drugs called GLP-1 agonists, which reached about 40 million prescriptions in the United States last year. The price of Ozempic, a diabetes medication increasingly used off-label for weight loss, is about $900 without insurance for a one-month supply.
A survey from Accolade reveals that 81% of human resource decision-makers say their employees would be interested in plans covering GLP-1 agonists. However, only 25% of the companies surveyed currently cover these medications, most of which plan to continue coverage in 2024.
American employers estimate that if they make no changes in plans, the cost for their largest medical plan will rise by an average of 6.6%. Nevertheless, they are not making cost-cutting changes to their plans.
Adler says that typically, out-of-pocket costs for employees are roughly a percentage of overall health costs.
"So as overall costs grow, we generally see the consumer out-of-pocket burden grow perfectly in tandem."- Loren Adler
However, Mercer's survey found that employers will not increase employees' share of the cost of coverage in 2024. Two-thirds (68%) of respondents said improving healthcare affordability will be important over the next few years.
In the past five years, employers have avoided the cost-management tactic of shifting costs to employees. This became especially true during the COVID-19 pandemic when some employer plan sponsors chose to absorb cost increases rather than ask employees to pay more out-of-pocket for health care.
Aon, a consulting firm, has projected an even greater increase in employee healthcare costs of 8.5% to more than $15,000 per employee in 2024.
"In a tight labor market, plan sponsors are hesitant to shift significant cost to plan participants and make benefits less affordable," said Farheen Dam, North American Health Solutions leader at Aon, in a statement.
Enhancing benefits is a priority
Managing high-cost claimants will be important for 84% of respondents over the next few years, according to the survey. This encompasses a range of strategies designed to improve outcomes for people with serious or chronic health issues, according to Beth Umland, a partner and research director at Mercer.
For example, Umland explains, employers include high-quality providers or facilities in the plan, such as Centers of Excellence for cardiac care, cancer treatment, musculoskeletal surgery, and bariatric surgery, among others. They also provide Specialty Rx "site of service" assistance so that members can choose to receive infusions such as chemotherapy at home.
Nearly nine in 10 American (89%) employees consider health insurance the most important work benefit. Unsurprisingly, 81% of employers said they would prioritize enhancing benefits to improve attraction and retention. Many (76%) will focus on improving access to behavioral health care, such as expanding Employee Assistance Programmes (EAP) services and adding virtual behavioral health care options.
According to Umland, cost-effective ways to improve health benefits might include:
- Providing several medical plan options at different price points so employees can pick a plan that best meets their needs, such as a narrow network plan, HDHP with an HSA, and others.
- Providing coverage for low-cost healthcare alternatives that are valued by members, such as doulas or midwives.
- Offering a range of voluntary (employee-paid) coverages, such as a hospital indemnity plan or cancer coverage.
- Expanding EAP services to provide more free counseling sessions or adding a virtual mental health care network.
- Providing paid time off for well-being activities.
Despite record increases in health benefit costs, employers will not return to cost-shifting to employees in 2024. Instead, they will prioritize making healthcare more affordable.
- Mercer. Health benefit cost expected to rise 5.4% in 2024.
- Accolade GLP-1 Coverage in Employer Plans Could Nearly Double in 2024.
- Society for Human Resource Management. 2023 Employee Benefits.
- Aon. Aon: U.S. Employer Health Care Costs Projected To Increase 8.5 Percent Next Year.