Health plan spending expected to grow 5.6% in 2023

US employers expect health insurance costs per employee to increase by an average of 5.6 percent in 2023. While premium growth is well above the 4.4 percent projected for 2022, growth in 2023 will lag behind overall inflation, which is currently about 8.5 percent per year. over a year

The cost growth forecast is based on the first 864 employers with 50 or more employees who responded through Aug. 4 to HR consulting firm Mercer’s National Survey of Employer-Sponsored Health Plans. The survey was launched on June 22 and remains open, with a final report expected this fall.

“Because health plans typically have multi-year contracts with health care providers, we have not yet felt the full effect of price inflation in increasing health plan costs,” said Sunit Patel, Mercer’s chief health and benefits actuary.

He said the impact of higher health care prices on plan costs “will be phased in over the next few years as contracts come up for renewal and providers negotiate higher reimbursement levels.” “Employers have a small window to avoid the sharp increase that will occur in 2024 as a result of the cumulative effect of current inflationary pressures.”

Patel cautioned that while most large self-insured employers have a good understanding of their insurance costs for 2023, many smaller fully insured employers have yet to receive renewal rates from their health plans. “These could well be higher as insurance carriers hedge their rates in today’s volatile health care market,” he added.

The projected 5.6 percent increase reflects changes employers plan to make to lower costs. If they made no changes, respondents indicated that the cost of their largest health plan would increase by an average of 7 percent.

Focus on accessibility

Despite rising costs, most employers do not plan to increase the employee share of coverage costs in 2023, such as by raising deductibles or co-pays

Among large employers (those with 500 or more employees) surveyed, employees will have to pick up an average of 22 percent of total health insurance costs in 2023 through payroll deductions, unchanged from 2022 and 2021.

In a survey conducted earlier this year, Mercer found that 11 percent of large employers will offer their employees free coverage in at least one health plan in 2023, and another 11 percent are still considering it.

“Health care affordability is a real concern for many workers, especially with inflation taking a toll on family budgets,” said Tracy Watts, Mercer’s national leader for US health policy. “Employers want to do everything they can to keep more money in workers’ paychecks and remove barriers to spending when help is needed.

“In today’s environment of record inflation and widespread labor shortages, employers have a really tough balancing act,” Watts added. “They must manage rising health care costs while making smart decisions about how to attract and retain the workers they need. Currently, we see that most employers prefer attractive benefits.”

Cost containment strategies

In June, insurance broker and consulting firm NFP reported that rising health care costs are forcing employers to review plans and offerings.

NFP
2022 US Benefits Trends Report, based on a February and March survey of 563 employee benefits decision makers, found that two-thirds of employers want innovative solutions to contain costs. When considering cost containment, about three-quarters of employers believe that each of the following factors is important:

  • Increased employee access to quality suppliers (83 percent).
  • Make costs more transparent (79 percent).
  • Reduction of out-of-pocket costs for drugs (79 percent).

“Employers today are realizing that ‘total cost transparency’ and provider accountability are also essential’ to reducing benefits costs,” said Heidi Cottle, head of cost containment strategies at the NFP. The development of the next-generation plan, she said, adds incentives that encourage employees to choose network providers that offer high-quality and competitive service.

According to the survey, more than 1 in 3 employers (36 percent) cited “cost containment” as the primary driver for offering alternative healthcare delivery options such as telemedicine. Half of respondents have implemented virtual solutions in mental health (55 percent) and primary care (54 percent) in the previous 18 to 24 months. About one-third have implemented virtual solutions for urgent care (37 percent) and acute care (31 percent).

Related SHRM article:

The IRS sets the health plan premium affordability threshold for 2023 at 9.12% of salary,
ShRM onlineAugust 2022

Leave a Comment

Your email address will not be published.