Health insurance coverage costs have been soaring, with more pressure being felt by employers, who cover the bulk of non-seniors in the U.S. Indeed, a new report finds, the rate of increase is set to double over the annual rate increases of the past few years, going into 2024. According to the results of a survey of employers by the London-based insurer and professional services firm Aon released on Aug. 25, average costs for U.S. employers that pay for their employees' health care will increase 8.5 percent to more than $15,000 per employee in 2024.
The projection increase, which assumes employers do not implement employee cost sharing increases and other cost saving strategies, is nearly double the 4.5 percent increase to health care budgets that employers experienced from 2022 to 2023. On average, the budgeted health care plan cost for clients is $13,906 per employee in 2023. The analysis uses the firm's Health Value Initiative database, which captures information for more than 800 U.S. employers representing approximately 5.6 million employees.
Since the COVID-19 pandemic, employers are seeing medical claims experience return to typical levels of growth and should anticipate more inflationary cost pressures in the coming year.
"While economy-wide inflation spiked during the past two years, employer-sponsored health care costs did not see dramatic increases during the same time period due to the multi-year nature of typical medical provider contracts," said Debbie Ashford, the North America chief actuary for Health Solutions at Aon, in a statement included in the press release. "Even though inflation is subsiding, health care trend is growing as medical providers push insurers for larger cost increases to cover the higher costs of wages and supplies that they endured during the last couple years but were unable to pass on to payers."
"Other contributing factors adding pressure on health care cost trends are the proliferation of newly indicated weight loss drugs, new technologies, severity of catastrophic claims and increasing share of specialty drugs," Ashford added.
In terms of 2023 health plans, employer costs increased 4.5 percent, while employee premiums from pay checks were slated to be a more modest 1.7 percent increase from 2022, according to Aon's analysis. Plan costs represent the employer's and employee's combined premiums for medical and prescription drug costs but exclude employee out-of-pocket payments such as deductibles, co-pays and co-insurance. On average, employers subsidize about 81 percent of the plan cost, while employees pay the remainder.
Key takeaways include the following:
• In terms of 2023 health plans, employer costs increased 4.5 percent, while employee premiums from pay checks were slated to be a more modest 1.7 percent increase from 2022. Plan costs represent the employer’s and employee’s combined premiums for medical and prescription drug costs but exclude employee out-of-pocket payments such as deductibles, co-pays and co-insurance. On average, employers subsidize about 81 percent of the plan cost, while employees pay the remainder.
• Employers continue to absorb most of the healthcare cost increases. Employees in 2023 are contributing about $4,675 for health care coverage this year, of which $2,682 is paid in the form of premiums from pay checks and $1,993 is paid through plan design features such as deductibles, co-pays and co-insurance, according to the firm’s analysis.
• The rate of health care cost increases vary by industry, as does the proportion of cost shared by the plan, employer plan sponsor and employee. The professional services industry has the highest average employer cost increase at 7.5 percent, while the manufacturing industry has the highest average employee cost increase at 2.9 percent. The retail and wholesale industry has the lowest average change in employee contributions: a half percent decrease from 2022 to 2023.
Interestingly, healthcare organizations, as employers, are faring better than employers in other industries. In contrast to the professional services sector, where employer costs increased 7.5 percent from 2022 to 2023, or to the technology and communications sector, where they increased 5.0 percent during that time, the increase across healthcare between 2022 and 2023 was only 3.2 percent.
