US employers anticipate a 5.4% increase in total health benefit costs per employee in 2024, despite implementing cost-control measures. Mercer’s National Survey of Employer-Sponsored Health Plans 2023, based on responses from over 1,700 employers as of August 14, reveals this significant uptick. The 5.4% growth, higher than the 3-4% annual average in previous years, can be attributed to recent economic challenges and ongoing factors in the healthcare sector. These include healthcare system consolidation and the introduction of costly gene and cellular therapies. Additionally, there’s an increase in the utilization of expensive GLP-1 drugs for diabetes and obesity treatment.
This 5.4% projection reflects employers’ efforts to manage costs. If no changes were made, the average cost of their largest medical plan would rise by 6.6%. This suggests that most employers are reluctant to make cost-cutting changes, possibly due to concerns about employee healthcare affordability. Larger employers (with 500 or more employees) have refrained from shifting costs to employees, which has contributed to faster health plan cost growth. Smaller employers, typically with fully insured plans, reported a higher average initial renewal rate of 7.5%. Nevertheless, cost increases vary widely among employers. Approximately 25% of respondents expected a cost increase of 10% or more without changes, while 29% anticipated an increase of 4% or less, including 12% expecting flat or decreasing costs.
Despite last year’s high inflation and healthcare labor shortages, factors such as strategies focused on improving patient outcomes help temper cost growth. Employers are moving away from cost-shifting to employees, instead implementing long-term strategies to manage costs related to complex care and chronic conditions. These strategies include steering members to higher-quality care through Centers of Excellence in health plan networks and offering health care navigation services. Point solutions, which enhance services for members with chronic conditions, have also become widespread.
Survey results indicate that large employers now prioritize monitoring and managing high-cost claimants and improving access to behavioral health care. About 76% of large respondents aim to enhance behavioral health care access, often by expanding Employee Assistance Programs (EAP) and adding virtual behavioral health care options. Additionally, employers do not plan to increase employees’ share of coverage costs in 2024. On average, employees will cover 22% of total health plan premium costs through paycheck deductions, unchanged from previous years. Some large employers will even provide free coverage in at least one medical plan in 2024.