Average costs for U.S. employers that pay for their employees’ healthcare will increase 6.5% to more than $13,800 per employee in 2023, largely due to economic inflation pressures, according to professional services firm Aon.
This projection is more than double the 3% increase to healthcare budgets that employers experienced from 2021 to 2022. But it’s significantly below the 9.1% inflation figure reported through the Consumer Price Index.
On average, the budgeted healthcare costs for clients is $13,020 per employee in 2022. The analysis uses the firm’s Health Value Initiative database, which captures information for nearly 700 U.S. employers representing about 5.6 million employees.
WHAT’S THE IMPACT
Medical claims were suppressed for most employers during the first year of the COVID-19 pandemic, during which time a lot of care was postponed or skipped during quarantines. Employers have seen the medical claims experience return to more typical levels of growth and anticipate inflationary cost pressures in the coming year.
Price increases driven by economic inflation typically are slow to appear in medical trends due to the multi-year nature of the typical provider contract. But it will become apparent over the coming year, according to Aon. Other contributing factors adding pressure on healthcare trends are new technologies, severity of catastrophic claims, blockbuster drugs and an increasing share of specialty drugs.
In terms of 2022 health plans, employer costs increased 3.7%, while employee premiums from paychecks were slated to be a more modest 0.6% increase from 2021, according to the firm’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, copays and coinsurance.
On average, employers subsidize about 81% of the plan cost, while employees pay the remainder.
Employees in 2022 are contributing about $4,412 for healthcare coverage this year, of which $2,520 is paid in the form of premiums from paychecks, and $1,892 is paid through plan design features such as deductibles, copays and coinsurance, according to Aon.
THE LARGER TREND
Employers of all sizes are looking to bolster their health benefit options in 2023 with an eye toward improving recruitment and retention, and will focus on affordability and access, according to a July Mercer survey.
More than two-thirds of the 700 respondents said they were looking to enhance their health and benefit offerings next year. In all, 61% of participating U.S. employers are conducting surveys on employee benefit preferences.
The survey also showed rapid growth in offerings on a wide range of family-friendly benefits, with 70% of surveyed employers currently offering or planning to offer paid parental leave in 2023, and 53% providing or planning to provide paid adoption leave. And nearly one in 10 large employers (those with more than 5,000 employees) say they provide on-site child care now or will by 2023, and 22% will provide access to back-up childcare services.