COMPLIANCE ALERT: Employers Expect Health Care Costs to Increase

In 2022, most employers’ health care costs increased. According to recent industry data, current signs are also pointing to significantly higher health care costs in the upcoming year. Employers now face the difficult task of reigning in rising health care costs and keeping employee coverage affordable while trying to remain attractive to current and prospective talent despite their shrinking budgets.

Many employers are worried about controlling rising health care costs and providing employees with affordable and quality care options. This article explores employer expectations regarding health care costs, reasons health care costs are rising and strategies employers are implementing to address increasing costs.

Employers Expect Health Care Costs to Increase

Reports from industry experts seem to agree that employers expect major increases in health care costs in 2023. Data from Willis Towers Watson’s 2022 Best Practices in Healthcare Survey found that U.S. employers’ health care costs are projected to increase 6% next year, compared with an average 5% increase experienced in 2022. Early Mercer survey results suggested that U.S. employers expect their health care costs per employee to rise 5.6% on average in 2023.

Those costs may increase even more if employers fail to take action to curb rising health care costs. If employers fail to make any changes—such as expanding telemedicine options and digital health care resources—employers believe the costs for their largest health care plans will grow by 7%. The International Foundation of Employee Benefit Plans reported that employers anticipate a 7.5% median increase in medical plan costs in 2023.

An analysis from global professional services firm Aon predicted employer health care costs will increase by 6.5% in 2023, with the average costs per employee reaching $13,800. Based on Aon’s analysis, this prediction is below the current inflation figure reported in the consumer price index, but it’s significantly higher than the increase in health care costs employers saw from 2021 to 2022. Additionally, HR and employee benefits consulting firm Buck found employer health care costs in 2023 are projected to increase between 5.8% to 6.9% in its 2022 National Healthcare Trend Survey.

Why Health Care Costs Are Increasing

There are a few reasons health care costs are increasing. While most employers had lower claim costs during the COVID-19 pandemic, medical plan costs are returning to pre-pandemic levels as health care utilization rebounds. Utilization has especially increased for employees dealing with severe chronic diseases and late-stage cancer due to missed or delayed care during the pandemic. Additionally, many employees are struggling with long COVID-19. Even those employees who have recovered from COVID are experiencing cardiovascular and neurological diseases, which is causing employer health care costs to increase.

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