In 2024, employers are anticipating the most significant health plan cost increase in a decade, with expenses projected to rise by 5.4 percent per employee, as revealed by Mercer’s 2023 survey. While employees continue to shoulder 22 percent of total premiums, factors like expensive therapies and economic conditions are driving the surge. Employers are countering this by implementing strategies like chronic disease management solutions and behavioral healthcare access, aiming to balance cost containment with employee well-being.
In the coming year, employers are bracing for a significant uptick in health plan costs, marking the most substantial increase in a decade. According to findings from Mercer’s National Survey of Employer-Sponsored Health Plans 2023, health benefits costs are predicted to surge by an average of 5.4 percent per employee in 2024. This projection, while significant, remains consistent with the 22 percent share of total premiums that employees have been expected to cover since 2022.
Mercer’s comprehensive survey, which encompassed responses from over 1,700 employers collected between June 12 and August 14, 2023, painted a picture of rising health plan expenses that surpass the average annual increases observed over the past ten years, typically ranging from 3 to 4 percent.
Interestingly, this 5.4 percent increase doesn’t represent the worst-case scenario. It reflects the estimated cost growth after employers enact modifications to their health plans. In the absence of these adjustments, costs could have spiked by an average of 6.6 percent.
However, it’s important to note that the degree of cost increase varied from one employer to another. Before implementing any changes to their plans, a quarter of employers foresaw medical plan costs rising by 10 percent or more, while 17 percent anticipated a more modest change of 1 to 4 percent. An additional 12 percent believed their costs would remain steady or even decrease.
One of the main contributors to these escalating costs is the emergence of new, expensive gene and cellular therapies, such as glucagon-like-peptide-1 (GLP-1) receptor agonist drugs. Additionally, employers have been cautious about shifting a larger share of these costs onto their employees, evident in the narrow gap between the projected increase before plan alterations (6.6 percent) and the post-adjustment figure (5.4 percent).
Researchers also pointed to inflation and labor shortages experienced in 2022 as potential factors influencing the cost surge expected in 2024.
On a positive note, several factors are helping to mitigate the extent of these cost increases. Employers are implementing strategies focused on enhancing patient outcomes and affordability, which may be tempering the full impact of rising expenses. Key initiatives include the widespread adoption of centers of excellence, care navigation services, and point solutions tailored to managing chronic diseases, all of which have the potential to curtail costs.
Nearly half of large employers (49 percent) now offer point solutions aimed at addressing chronic diseases, with almost three in ten (28 percent) planning to provide healthcare navigation services in 2024. Employers are also prioritizing the management of complex care for employees, with 85 percent considering this aspect “important” or “very important,” alongside efforts to enhance benefits for talent retention and attraction.
Furthermore, extending access to behavioral healthcare is gaining significance for many employers. They are exploring options like employee assistance programs and virtual behavioral healthcare to cater to the growing need for mental health support.
Overall, while the burden on employees in covering health plan premium costs remains at 22 percent, employers are gearing up to face the highest health plan cost growth in a decade, driven by a mix of factors, and are adopting various strategies to navigate this challenging landscape.
