Employers Expect Highest Health Plan Benefits Cost Growth in 10 Years

In 2024, experts anticipate that health benefits costs will increase 5.4 percent on average per employee, according to Mercer’s National Survey of Employer-Sponsored Health Plans 2023.

Mercer surveyed more than 1,700 employers to determine this cost increase of health benefits. The researchers gathered responses from June 12 through August 14, 2023.

The results outstripped the average annual cost increases of the previous ten years. Over the past decade, the typical increase hovered around 3 to 4 percent.

Although the increase seems extreme in context, it is not as dire as it could be. The 5.4 percent increase reflects projected cost growth after employers make changes to their health plans. Without any changes, costs could increase by an average of 6.6 percent.

However, the cost increase varied by employer. Before making plan changes, a quarter of employers expected medical plan costs would increase by 10 percent or more, while 17 percent expected a change of 1 to 4 percent. Another 12 percent anticipated that their costs would not change or would drop.

One of the key factors driving costs upward is new, expensive gene and cellular therapies like glucagon-like-peptide-1 (GLP-1) receptor agonist drugs. Additionally, employers are hesitant to shift more costs to their employees, as evidenced by the narrow difference between the cost increase before plan changes (6.6 percent) and after price increases (5.4 percent).

The inflation and labor shortages in 2022 may also play a role in the 2024 cost increases, the researchers noted.

Conversely, a couple of factors may be preventing costs from skyrocketing higher. Employer strategies around improving patient outcomes and affordability may be restraining the full force of the cost increases. Specifically, the widespread use of centers of excellence, care navigation, and point solutions for chronic disease management may have reduced costs.

Nearly half of all large employers offered point solutions for chronic diseases (49 percent). Almost three in ten large employers planned to offer healthcare navigation services in 2024 (28 percent).

In 2024, employers’ top priorities include managing costs for employees with complex care, which is “important” or “very important” to 85 percent of employers, and improving benefits with the goal of talent retention or attraction.

Extending access to behavioral healthcare will also be important to many employers. They are likely to employ employee assistance programs and virtual behavioral healthcare to address behavioral health needs.

Employees will be responsible for slightly less than a quarter of health plan premium costs (22 percent).