Health Benefit Cost Growth Will Accelerate To 5.6% in 2023

US employers expect health benefit cost per employee to rise 5.6% on average in 2023, according to early results from Mercer’s National Survey of Employer-Sponsored Health Plans 2022, which launched June 22 this year and remains open.

While significantly higher than the increase of 4.4% projected for 2022, the 2023 increase lags overall inflation, which is currently running at 8%-9%. Because health plans typically have multi-year contracts with health care providers, it is likely that we haven’t felt the full effect of price inflation in health plan cost increases yet. Rather, the impact 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 get out in front of sharper increases coming in 2024 from the cumulative effect of current inflationary pressures.

These results are based on the first 864 employers responding to the survey. While most large, self-insured employers have a good sense of their 2023 costs by now, not all small, fully insured employers have received 2023 renewal rates from their health plans yet. Those may come in higher as insurance carriers hedge their bets in today’s volatile health care market. 

The projected increase of 5.6% reflects changes that employers plan to make to hold down cost. If they made no changes, respondents indicated that the cost for their largest medical plan would rise by an average of 7.0%.

Employers are prioritizing benefit enhancements for 2023

The survey asked employers to rate nine benefit strategies in terms of their importance over the next 3-5 years. “Enhancing benefits to improve attraction and retention” came out on top, with 84% of large employers (those with 500 or more employees) rating it important or very important. It’s an even higher priority than “monitoring and managing high-cost claimants,” which was second this year but historically tops the list.

In today’s environment of record-breaking inflation and widespread labor shortages, employers face a tough balancing act: They must manage rising health care costs while making smart decisions about how to attract and retain the workers they need. For now, we are seeing the majority of employers prioritizing attractive benefits.
Behavioral health is one benefit area where many employers are looking to expand. Nearly three fourths of large respondents (74%) say that improving access to behavioral health care will be a priority over the next few years. Examples of benefit enhancements include expanding EAP services and adding virtual behavioral health care options.

Focus on health care affordability

Another area of concern is health care affordability. Despite rising costs, the majority of employers will not take cost-saving measures that shift healthcare expense to employees, such as raising deductibles or copays. Only 36% of survey respondents are making cost-cutting changes in 2023, down from 40% in 2022 and 47% in 2021.

Further, overall, employers will not increase employees’ share of the cost of coverage in 2023. Among large employers responding to the survey, employees will be required to pick up 22% of total health plan premium costs, on average, in 2023 through paycheck deductions, unchanged from 2022 and 2021. In a survey conducted earlier this year, Mercer found that 11% of large employers will offer employees free coverage in at least one medical plan in 2023, and another 11% are still considering it.

Healthcare affordability is a real issue for many employees, especially with inflation stressing household budgets. The survey results suggest that employers generally are trying to keep more money in employees’ paychecks and remove cost barriers when care is needed.

About Mercer’s National Survey of Employer-Sponsored Health Plans 2022: The 2022 National Survey of Employer-Sponsored Health Plans was launched on June 22 and remains open. The preliminary results discussed above are based on responses from the first 864 employers responding (through August 4). The final survey results will be released this fall. Visit Mercer’s National Survey of Employer-Sponsored Health Plans website for more information about the survey.