2021 Employer-Sponsored Health Plan Spending Growth Hit 6.3%

Costs for employer-sponsored health plans increased 6.3 percent in 2021, surpassing every annual increase since 2010, a Mercer survey discovered.

“Employers seem optimistic that this year’s sharp increase is simply a result of people getting back to care,” said Sunit Patel, chief actuary at Mercer.

Mercer surveyed over 1,700 employers in both the public and private sectors to assess their healthcare spending in 2021.

Employers experienced the increase differently based on size. Companies with 50 to 499 employees tended to see a bigger spike in spending in 2021, with the average spending growth hitting 9.6 percent. 

Meanwhile, larger companies experienced a 5.0 percent average spending increase. This growth still exceeded the 2020 overall spending increase, but it was not as intense as the small business sector’s increase. Large employers also saw growth in prescription drug spending (7.4 percent), particularly specialty drug sending (11.1 percent).

The rise in employer-sponsored healthcare spending exceeded the previous year’s increase of 3.4 percent.

Other trends in the employer-sponsored health plan space in 2021 included a dramatic shift in employee cost-sharing. Employers large and small reduced cost-sharing by refusing to raise deductibles and cutting out-of-pocket healthcare spending requirements.

Looking at the median cost-sharing cuts, small employers chopped cost-sharing in their preferred provider organization plans from $1,000 to $900.

Meanwhile, large employers’ cost-sharing in plans that were eligible for health savings accounts tended to drop from $2,000 to $1,850. Employees in large businesses saw their premiums rise, on average, $7 per month for single coverage and $12 per month for family coverage in preferred provider organization plans.

The survey also found that large employers offering high deductible health plans often provide a lower-deductible alternative.

“In the wake of the pandemic many employers committed to help end health disparities, and ensuring care is affordable for their full workforce is an important part of that,” said Tracy Watts, national leader for US health policy at Mercer.

Nearly three-quarters of all large employers regarded behavioral healthcare benefits as one of their top three most important benefits. These benefits are particularly popular among very large companies. Health equity and social determinants of health will be key to healthcare coverage strategies in the coming years among large employers.

With healthcare costs becoming more unsustainable for employers, the survey recommended that employers focus on value-based care to reduce costs without creating a heavier financial burden for employees.

“Value starts with quality providers that achieve good outcomes, but convenience must be part of the equation, along with affinity,” Watts said. “People want to get their care through the channels they are most comfortable with, and that’s not always a doctor’s office. It might be a pharmacy, a retail establishment, or online.”

Employers can use centers of excellence and accountable care organizations to drive high-value spending, the survey recommended.

Employers are also utilizing digital healthcare tools to boost high-value care. A quarter of all large employers provide targeted digital health solutions for chronic disease management and nearly three out of ten large employers have a virtual care network to support access to care.

Personalized benefits may not apply to the entire employee population but can be essential to certain employee populations. For example, employers can expand well-informed benefits for gender dysphoria treatment.

“In today’s environment of varied working situations, employers see this type of personalization as a way to ‘even out’ the benefits available across onsite, remote, and hybrid workers,” Watts shared.

After the spike that this sector experienced in 2021, 2022 promises a less extreme trajectory. Employers anticipate a 4.4 percent increase in spending next year. Patel expected that higher utilization following deferred care, long-term coronavirus treatment claims, genetic and cellular drug therapies, and healthcare price inflation would all drive that spending increase. Other reports have projected that employer health benefits spending will normalize in the new year.

Mercer’s full report will be published in March 2022.