Inflation is on the rise and so are the prices of everything, from gasoline to housing, with health benefits in the workplace the latest to report worrying numbers. Health benefits for employees are proving to be a huge investment for employers, with total health benefit cost per employee expected to rise 5.4% on average in 2024. This news comes from the National Survey of Employer-Sponsored Health Plans 2023 published by Mercer, which surveyed 1700 employers that provided health plans at work for their employee’s welfare.
Mercer’s 2022 report indicated that health benefit cost per employee had gone up by 3.2%, with average cost per employed topping $15,000. Matters appear to have far worsened in 2023.
Why Is the Cost of Health Benefits in the Workplace Rising?
There are many factors that are contributing to the rising costs of healthcare. The report cited that the inflation still trailing us from last year could be one of the reasons for the burgeoning expenses of health plans at work. The labor shortage that has hit the U.S. markets, particularly nurses, is also of great concern. McKinsey surveyed inpatient registered nurses and found an intent to leave their workplace rising from 35 percent in 2022 to 40 percent in 2023, highlighting an ongoing trend in the labor force. These respondents continued to feel inadequately compensated and valued by their organizations.
The prices of new treatments and medications are also cited as major contributors to the rising cost projections. Latest new-generation gene therapy treatments have been reported as priced upwards of $2.1 million for a shot, according to a report by The Economist. Pharmaceutical companies and researchers insist that costs have to remain high for the production and further research to be viable. While gene and cellular therapies are limited to the treatment of rare disorders, specialty drugs for more commonplace treatments are on the rise as well.
Health benefits in the workplace most often cover costs for the treatment of conditions that affect a larger number of people and require prolonged medication use, conditions such as hypertension. Virta concluded that 72 percent of health plan leaders now expected GLP-1 (Glucagon-like peptide-1) use to increase by 25 percent or more in 2023. The rising costs have been a result of increased use for the treatment of diabetes, but also a trend of utilizing the drug for weight loss.
With the healthcare industry in such disarray and a larger number of employees relying on group insurance to get them through their health concerns, the responsibility has largely fallen on employers to mitigate the costs.
What Are Employers Doing to Manage Rising Healthcare Costs?
Employer plans to handle the shift have seen some cost-cutting attempts being made, but admirably, these have not resulted in any increase in deductibles and other cost-sharing requirements for employees. While the impact of the strategies has been minimal so far, employers are hesitant to make any big moves as these would inevitably imply a reduction of the available health benefits for employees and a shift of the expenses onto them.
The Mercer report indicates that employer plans have instead centered around absorbing the shock and assisting their employees in receiving higher-quality healthcare, by including Centers of Excellence in their health plan networks at work. These COEs are equipped to cover a variety of healthcare needs and provide high-quality care to ensure health benefits for employees. With advocacy services included to provide healthcare navigation towards the right solutions for each individual, companies can ensure that employees receive the right treatment at pivotal times to avoid healthcare costs adding up at a later stage. 28 percent of large employers now have navigation services established in preparation for 2024.
Health benefits in the workplace were a focus for employers last year, as a tactic to attract the right talent and improve their retention rates. This year, the focus has shifted to cost mitigation by assisting high-cost claimants in managing their healthcare expenses better. This will likely remain a crucial component in employer plans until the healthcare market settles down.
It remains to be seen if these current strategies will be sufficient to bring the health benefit costs down this year and if additional strategies will be necessary. For now, the strategy is sound. Additionally, expanding access to behavioral healthcare and managing costs for specialty drugs are other components of the health plans at work, which employers see as a priority for the next 3-5 years. With 1900 respondents, Mercer will release the final data points for 2023 later this year.