Health benefit cost rose 3.2% in 2022, but employers see bigger increases ahead, Mercer survey
- US employers expect a sharper increase of 5.4% in 2023 -- and faster cost growth in the years ahead seems likely
- For now, most employers are prioritizing enhancing benefits to attract and retain workers over cost-cutting; enhancements range from adding perks to improving healthcare affordability
- Mental health remains a top concern of employers and employees – and virtual mental healthcare is proving key to improving access to services
December 8, 2022
United States, New York
The average per-employee cost of employer-sponsored health insurance rose by 3.2% in 2022, according to Mercer’s 2022 National Survey of Employer-Sponsored Health Plans, released today (Fig 1). Last year saw a spike in cost growth (to 6.3%) as individuals caught up on healthcare needs delayed as a result of the pandemic. While this year’s increase may seem like a return to normal trend, it is far below general inflation, which is averaging about 8% for 2022. Typically, health benefit cost growth runs higher than general inflation. According to Sunit Patel, Chief Health Actuary at Mercer, 2022 is an anomaly because employer health plan sponsors haven’t felt the full impact of inflation yet.
“In the healthcare sector, higher wages, labor shortages, and consolidation will almost certainly result in higher prices,” Patel said. “One reason cost growth lagged inflation this year is because healthcare providers typically have multi-year contracts with health plans. So although employers did not feel the full brunt of inflation immediately, it’s very likely that inflation-driven cost increases will phase in over the next few years as contracts are renewed.”
Employers did project a higher average increase for next year -- 5.4% -- and Patel cautions they should be prepared for continued accelerated cost growth in 2024 and beyond.
Total health benefit cost per employee reached $15,013 on average in 2022, with small organizations (50-499 employees) reporting slightly higher costs than large organizations (500 or more employees) (Fig. 2). While large employers generally offer richer benefits than small employers, most are able to self-fund their medical plans (saving on insurance company risk charges), and they typically have more resources to devote to health program management.
Keeping healthcare affordable
In today’s inflationary environment, with many employees concerned about their ability simply to cover their monthly bills, affordable healthcare is even more critical. In a recent Mercer survey of over 4,000 US employees, 68% said they feel challenged in getting needed healthcare, and the most common challenge cited was being able to afford healthcare expenses that aren’t covered by insurance.
Given the focus on affordability, it is not surprising that, despite expectations of higher healthcare costs, most leaders are avoiding “healthcare cost shifting,” or giving plan members more responsibility for the cost of health services through higher deductibles or copays; there was little change in the median amount of these cost-sharing features in 2022. The survey also found employers are continuing to back away from offering a high-deductible account-based plan as the only option, particularly among the very large organizations (20,000 or more employees) that had been the fastest to adopt this so-called “full-replacement” strategy. Just 9% of these employers now offer a high-deductible plan as the only option at the largest worksite, down from 13% in 2021, and 22% four years ago in 2018 (Fig. 4).
In addition, more of these very large employers used salary-based premiums in 2022 (34%, up from 29% in 2021), by which lower-wage workers see smaller paycheck deductions for health coverage than those with higher salaries.
“The affordability issue cuts both ways. Employers will be challenged to absorb the higher costs coming down the pike, but they also know some people will forego important care when they feel they can’t afford it,” said Tracy Watts, National Leader for US Health Policy, Mercer. “Particularly with inflation putting added stress on household finances, budget concerns need to be balanced with the downstream implications of healthcare affordability. So the focus now is on strategies to rein in cost growth without shifting the cost to the employee.”
How employers are managing cost without shifting the cost to employees
Virtual mental healthcare is a bright spot
Growth in virtual mental healthcare is part of a larger trend: Employers are adding many types of virtual healthcare solutions to their programs, and utilization rates for traditional telemedicine have jumped since the pandemic began. At the same time, the demand for mental healthcare is growing. More than ever before, employers view supporting the mental, emotional and behavioral health of employees as a business imperative – especially given that “burnout” is one of the top three reasons employees consider leaving their jobs.
A Mercer survey of more than 700 organizations conducted earlier this year that focused on strategies for 2023 asked about actions employers would take to provide greater support for behavioral health. Over half (52%) of large survey respondents say employees will have access to virtual behavioral healthcare in 2023.
“Even before the pandemic, there was a shortage of mental health providers and that has not changed. What has changed is the explosion of virtual mental healthcare as an alternative to in-person care,” added Watts. “Being able to receive care in the privacy of one’s home – and saving the time and cost of traveling to a physical office – is a game-changer for many people.”
People’s willingness to use virtual mental healthcare is demonstrated by an analysis of data in MercerFOCUS, which warehouses the claims of over 1 million health plan members. There was a substantial increase in the number of people accessing outpatient behavioral health services in 2021, from 73 members per 1,000 to 83. Notably, virtual mental health visits – essentially non-existent prior to the pandemic – were utilized by 39 members per 1,000, suggesting that the availability of this option resulted in more people getting mental health support.
“It is encouraging that so many employers have prioritized mental health in their health program strategies – not just at the benefit level but in an organization’s culture as well. In a Mercer survey conducted earlier this year, more than a third of large employers are training managers to recognize behavioral health issues and direct employees to existing resources,” says Watts. “Ideally, behavioral healthcare will become an integrated, essential part of healthcare, in which an anxiety disorder or burnout is easily identified and addressed – and without stigma.”
Mercer’s National Survey of Employer-Sponsored Health Plans included 2,028 public and private employers in 2022. Based on responses from employers in a national probability sample in combination with a non-probability sample, survey results have been weighted (using employer size and geographic stratification) to represent the approximately 170,000 employer health plan sponsors across the US with 50 or more employees. These organizations employ about 124 million full- and part-time employees.
The full report on the Mercer survey, including a separate appendix of tables of responses broken out by employer size, region, and industry, will be published in March 2023. For more information, visit www.mercer.com/health-benefit-trends.