Employer health insurance costs spiked in 2021, and it remains unclear if this is a one-off course correction or the beginning of a new trend, according to a new Mercer survey.
The average cost for insurance per employee rose by 6.3% in 2021 as care use returned to more normal levels after plummeting in 2020. Insurance costs increased by 3.4% on average per employee last year.
The 2021 jump is the largest increase recorded in the survey since 2010. Employers are optimistic that the trend is unlikely to continue, projecting a 4.4% increase for 2022. However, Mercer analysts said there are still plenty of hurdles ahead that could drive up costs.
“Employers seem optimistic that this year’s sharp increase is simply a result of people getting back to care,” said Mercer’s chief actuary, Sunit Patel, in a statement. “At the top of the list of concerns are higher utilization due to ‘catch-up’ care, claims for long COVID, extremely high-cost genetic and cellular drug therapies, and possible inflation in healthcare prices.”
The survey found higher cost growth for smaller employers of between 50 and 499 employees, who saw costs jump 9.6% in 2021. Larger employers reported a more modest 5% increase, according to the survey.
This suggests, Mercer said, that insurers were expecting significant costs going into 2021, as smaller employers are more likely to offer fully insured plans.
Large employers did report a significant increase in drug spending for 2021, with overall spending up 7.4%. This was driven in large part by an 11.1% increase in spending on specialty drugs, according to the survey.
The survey also found that while healthcare costs sharply rose, employers largely did not turn to cost-shifting as a strategy to manage the increase. Among small employers, the median deductible in a PPO plan decreased from $1,000 to $900 in 2021, according to the survey.
The median deductible in health savings account-eligible plans at large employers also decreased in 2021, from $2,000 to $1,850.
Large employers also did not significantly increase employees’ premium contributions this year, according to the survey. The average monthly deduction increased by $7 for individual coverage and $12 in PPO plans.