Mercer Forecasts 4.4% Increase In Benefit Costs For 2021

A new study from Mercer shows that employers are committed to providing their employees with benefits, despite the economic challenges they may be facing.

In a survey of 1,113 employers, Mercer found benefit costs are expected to grow 4.4% on average next year, but uncertainty is driving “wide variations” in estimates.

“Different assumptions about cost for COVID-related care, including a possible vaccine, and whether people will continue to avoid care or catch up on delayed care, are driving wide variations in cost projections for next year,” Tracy Watts, a senior consultant with Mercer, said in a statement.

The projected cost increase is in line with annual growth over the past six years, Mercer found, but far exceeds the Consumer Price Index and wage growth, which are sitting close to zero.

Still, only 18% of employers said they’re shifting some of those costs to workers, according to Mercer. In fact, unlike in the Great Recession, most employers (57%) aren’t making any changes at all.

“This is different from what we saw at the start of the economic recession in 2008, which drove many employers to trim health benefits,” Watts said. “Given all the turmoil employees have been through this year, employers are putting big changes on hold, looking to balance economics with empathy.”

Of the quarter of employers who are planning changes, here’s what they’re considering:

  • * 27% are adding or improving digital health care and telemedicine services, including virtual visits, AI-based triage and texting services.
  • * 22% are enhancing voluntary benefits like critical illness insurance.
  • * 20% are adding or improving behavioral health care benefits.
  • * 16% offer a financial subsidy for in-home child care and 12% have a back-up benefit for child care.

“Many employers are avoiding health plan changes that impact employees this year, but they know managing cost must remain a priority,” Watts noted. “Plan member stress and care avoidance in 2020 may result in higher utilization in 2021, and struggling health systems may seek to recoup lost revenue through higher prices.”


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