Mercer: Employers expect increased healthcare costs in 2023

Published Aug. 12, 2022 - HR Dive
Ryan Golden, Senior Reporter

Dive Brief:

The average health benefit cost per U.S. employee is expected to increase by 5.6% next year, according to preliminary results from a Mercer survey of 864 employers that launched June 22 and was collected Aug. 4.
That figure is up from the 4.4% increase projected for 2022, but it is lower than overall inflation, Mercer said. Employers may not be feeling the full impact of price inflation within their plans, however, because of the multiyear nature of healthcare provider contracts, Sunit Patel, chief actuary for health and benefits at Mercer, said in a statement.
Large employers are nonetheless set on enhancing their benefits for the foreseeable future, with 84% stating that this was an important or very important strategy, per Mercer. Other areas of focus include behavioral healthcare and overall healthcare affordability; the majority of employers said they would not take cost-saving measures that shift expenses to employees, like raising deductibles or copays.

Dive Insight:

Years of upheaval wrought by COVID-19 have left their mark on the healthcare ecosystem. In recent months, U.S. health systems have continued to report declining hospital volumes and procedures, leading to large profits for insurers, according to Healthcare Dive. Cigna, for example, disclosed a 6% increase in income year over year with fewer hospital admissions, surgeries and emergency room visits among members.

Lower utilization has not stopped healthcare price inflation, however. A recent report by healthcare management consulting firm Kaufman Hall found that hospital margins improved in June compared to May, but that supply chain and labor costs continued to keep expenses high.

Further out, some employer advocates believe that prescription drug costs could soon climb as well, depending on the impact of the Inflation Reduction Act. The bill, expected to pass the U.S. House of Representatives Friday, would allow Medicare to negotiate pharmaceutical drug prices with manufacturers. Sources who spoke to HR Dive said this could cause manufacturers to turn to group health plans ・including those funded by employers ・to make up for any lost revenue.

Employers, meanwhile, continue to navigate a series of crucial conversations affecting their health plans. The list includes hot-button issues such as abortion and reproductive care access as well as mental health. Facing a competitive talent market, 64% of U.S. organizations in a Willis Towers Watson survey from April said they plan to up their efforts to address healthcare affordability over the next two years, and 87% said improving mental health benefits is a top priority.

Mercer’s survey indicates that employers may seek to avoid cost-saving strategies that put additional financial stress on employees. Plan design may be an area for employers to consider along these lines; a recent Employee Benefits Research Institute analysis found that an overall increase in the share of high-deductible health plans may be fueling a corresponding rise in out-of-pocket costs for workers.

Accessibility and equity are also top of mind for employers, insurers and vendors. A July 30 McKinsey & Co. report found that 45% of front-line hourly employees of color said they did not feel they could take advantage of work-life benefits like leaves of absence and parental leave, even when they had access to them.