BenefitsHR News/North AmericaNews Ticker

The Cost of Healthcare Rose this Year—and Will Continue Upward

Businesses are focusing on how to tailor their offerings to attract the best candidates, despite cost. 

By Zee Johnson

DEC 12 – Mercer’s 2022 National Survey of Employer-Sponsored Health Plans revealed that in 2022, health benefits cost increased by 3.2%.  

The total health benefit cost per employee reached an average of $15,013 in 2022, with small organizations with between 50 and 499 employees paying more than large organizations with 500 or more employees ($15,278 to $14,948). And in 2023, costs are expected to jump to 5.4%. 

Mercer’s Chief Health Actuary Sunit Patel says that there’s been a lot happening—inflation, labor need fluctuations, and more—all of which have a direct correlation to rising healthcare costs. “In the healthcare sector, higher wages, labor shortages, and consolidation will almost certainly result in higher prices,” he said in a press release. “So, although employers did not feel the full brunt of inflation immediately, it’s very likely that inflation-driven cost increases will phase in over the next few years as contracts are renewed.” 

But employers are well aware that healthcare benefits greatly influence candidate employment decisions, so they are prioritizing changes that will help set their programs apart. The survey found that employers are now moving away from only offering high-deductible account-based plans, particularly among the very large organizations of 20,000 or more employees. In fact, just 9% of these employers still offer a high-deductible plan as the only option, a 13% decrease from 2021 and a 22% decline from 2018. 

Changes aren’t stopping there. Of respondents who have 500 or more employees, they plan to 

  • enhance benefits to improve attraction and retention (44%); 
  • manage high-cost claimants (47%); and 
  • expand behavioral healthcare access (36%). 

And larger companies with 20,000 or more employees say they are 

  • expanding behavioral healthcare access is very important (41%); 
  • managing cost for specialty drugs (38%); and 
  • improving health care affordability (31%). 

Tracy Watts, national leader for U.S. health policy at Mercer, says that healthcare affordability challenges act as a double-edged sword. “The affordability issue cuts both ways. Employers will be challenged to absorb the higher costs coming down the pike, but they also know some people will forego important care when they feel they can’t afford it,” she said in a press release. “Particularly with inflation putting added stress on household finances, budget concerns need to be balanced with the downstream implications of healthcare affordability.” She urges organizations to focus on strategies that will help save money without allocating more of the burden to employees.  

In a separate Mercer survey, 68% of employees said they felt challenged in getting needed healthcare, with the most common challenge being the ability to afford healthcare expenses that aren’t covered by insurance. Further, one of the biggest health benefit cost drivers is high-cost specialty drugs used to treat complex medical conditions like cancer and autoimmune disorders. The survey found that large employers spent 10% more on specialty drugs in 2022, with higher increases coming in the near future. 

To ease employee concerns, the survey found that 35% of all large employers and 53% of very large employers say that encouraging employees to go with high-performing provider networks and other sources of high-value care is an important strategy for them.  

And a trend that’s gaining more traction, the survey found, is virtual mental healthcare and the addition of a variety of virtual healthcare solutions. This comes at a time where traditional telemedicine utilization rates are up since the start of the pandemic and the demand for mental healthcare continues to grow. Now, employers are citing mental health resources as imperative and are using them to support employee well-being while also attracting quality talent.  

“It is encouraging that so many employers have prioritized mental health in their health program strategies – not just at the benefit level but in an organization’s culture as well,” Watts says. “Ideally, behavioral healthcare will become an integrated, essential part of healthcare, in which an anxiety disorder or burnout is easily identified and addressed – and without stigma.” 

The full report on the Mercer survey, with breakdowns by employer size, region, and industry, will be published in March 2023. 

Tags: Benefits, HR News/North America, News Ticker

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