Preliminary results of a Mercer survey find that more employers expect increases in health benefit costs for 2024.
The earliest findings from the 2023 National Survey of Employer-Sponsored Health Plans shows that plan sponsors anticipate total health benefit costs per employee to rise an average of 5.4% in 2024, up from former averages of 3% to 4%.
Mercer experts attributed the rising health benefit costs to high inflation figures in 2023, along with labor shortages in the healthcare industry. Consolidated health systems, as well as expensive health care services, add to rising costs, said Sunit Patel, chief actuary for Health and Benefits at Mercer.
According to the research, the projected increase of 5.4% reflects changes that employers plan to make to keep the cost. If employers were to not make any changes, respondents indicated that the cost for their largest medical plan would rise by an average of 6.6%.
“The relatively small difference between the size of the projected increases before and after plan changes indicates that most employers are not making cost-cutting changes to their plans, reflecting concerns about employee healthcare affordability,” the survey reported.
As a result, Mercer reports that a higher number of large employers are avoiding shifting the expenses to employees, and instead choosing to eat the costs. 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 to 499 employees, who typically have fully insured plans, Mercer adds, reported a higher average initial renewal rate of 7.5%. “It’s not surprising that fully insured plans would have somewhat higher increases. Given the unpredictability of the healthcare market, insurance carriers are hedging their bets for next year,” said Patel.
In all, 68% of large employers say that strategies to improve healthcare affordability for employees will be important over the next few years, reports Mercer. The survey also found that overall employers will not increase employees’ share of the cost of coverage in 2024. Large employers expect employees will be required to pick up an average of 22% of total health plan premium costs through paycheck deductions in 2024, unchanged from 2023 and 2022.
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
