Employers couldn't duck higher costs of covering workers: survey

Pulling out the stops to bring the cost of workplace health insurance coverage down couldn't keep employers from absorbing some of the biggest increases in a decade this year, according to preliminary findings from Mercer's 2023 National Survey of Employer-Sponsored Health Plans.

• The trend is expected to continue for 2024, Mercer experts tell Axios.

Why it matters: Employers continue to be squeezed by medical inflation at the same time they're fighting to retain workers in a tight labor market.

The big picture: Health coverage per employee has typically risen 3% to 4% a year for the last decade. But the survey of 1,700 employers indicates they saw costs rise more than 5% this year.

• They expect costs to rise 5.4% next year, and note that only changes to benefit design kept the boost from reaching 6.6%.

Between the lines: New and pricey drugs, big claims and economic conditions are injecting much more volatility into the picture, Sunit Patel, Mercer's chief actuary for health and benefits, told Axios.

• "Even if the average increases, say 5.5%, you've got more clients, more employers, who are outliers, that are in excess of 10%, than we've ever seen," he said.
• Specifically, companies are coping with more gene therapies and other expensive treatments for small patient populations that carry high costs. The use of pricey GLP-1s for for weight loss is also a major concern.
• High inflation and labor shortages in health care, as well as consolidation, are also driving up prices.

• "We're hearing from a lot of finance officers and others just wishing that they had the ability to better predict claims," he said.

What we're watching: How much of the expected increases will get passed along to the workforce.

• Employers have been trying to avoid passing increases on to workers for about five years, fearing employees could hit a tipping point when it comes to out-of-pocket spending.
• Mercer found the majority of large employers that responded to the survey do not plan to increase cost-sharing in 2024 and will require employees to pick up an average of 22% of premium costs.