Report: Employer health plan costs could rise by 5+% in 2024

Employers expect health benefit costs to rise by more than 5% on average in 2024 as factors like high inflation, health labor shortages, and expensive new therapies put pressure on plan spending after years of 3%–4% annual growth, early data suggests.

Preliminary results from Mercer’s 2023 National Survey of Employer-Sponsored Health Plans found that total health benefit costs could increase by as much as 6.6% per employee if companies do nothing to control spending, or an average of 5.4% if employers take steps to hold down costs.

That slight gap suggests most employers don’t plan to make cost-cutting changes to their plans—likely due to concerns about healthcare affordability, the analysis noted. Many large companies (with 500+ employees) have avoided shifting costs to employees over the last five years, resulting in little growth in deductibles and other cost-sharing requirements.

However, smaller companies—those that have 50 to 499 employees and typically offer fully insured plans—could see even higher costs in 2024, according to Mercer. They reported an average initial renewal rate of 7.5%.

“Considering the economic environment, projected health benefit cost increases could have been worse,” Tracy Watts, Mercer’s national leader of US health policy, said in a statement. “One factor may be that as employers have moved away from cost-shifting to employees, they’ve been implementing cost-management strategies directed at the biggest drivers of cost: complex care and chronic medical conditions.”

Sunit Patel, Mercer’s chief actuary for health and benefits, further attributed the projected rising health benefit cost increases to inflationary pressures, health system consolidation, and new “ultraexpensive gene and cellular therapies.” Another factor, he added, is “the impact of a sudden jump in utilization of costly GLP-1 drugs being used to treat diabetes and obesity.”

The preliminary report surveyed 1,700+ employers from June 12 to August 14. The final results are set to be released this fall.