Health benefit costs expected to grow 4.4% in 2021 as employers face continued economic uncertainty, Mercer survey finds


Despite many unknowns, most employers will not trim employee health benefits to slow cost growth next year


New York, October 1, 2020 – Employers expect moderate health benefit cost growth for 2021 of 4.4% on average compared to 2020, according to early results from Mercer’s National Survey of Employer-Sponsored Health Plans 2020. The increase, based on 1,113 employer responses since early July, is largely in line with the average annual cost growth over the past six years.  Still, health benefit cost growth is now far outpacing the Consumer Price Index and wage growth, which have fallen to nearly zero (see Figure 1).  


Health plans face many unknowns in developing cost projections for 2021. According to Tracy Watts, a senior consultant with Mercer, “Different assumptions about cost for COVID-related care, including a possible vaccine, and whether people will continue to avoid care or catch up on delayed care, are driving wide variations in cost projections for next year.”


Employers won’t cut benefits to slow cost growth next year


Even amid economic uncertainty caused by the COVID-19 pandemic, only 18% of employers responding to the survey say they will take cost-savings measures for 2021 that shift more healthcare expense to employees, such as raising deductibles or copays.  In fact, the majority of survey respondents (57%) will make no changes whatsoever to reduce cost in their medical plans in 2021. That compares to 47% making no changes last year, and just 44% in 2018.


“This is different from what we saw at the start of the economic recession in 2008, which drove many employers to trim health benefits,” said Ms. Watts. “Given all the turmoil employees have been through this year, employers are putting big changes on hold, looking to balance economics with empathy.  


In fact, many employers are adding new resources to support and engage employees in the COVID era.  At the top of the list: virtual office visits and other digital healthcare resources (see figure 2).  More than a fourth of all respondents (27%) and well over a third of the largest employers (37% of those with 5,000 or more employees) are adding or improving digital healthcare resources, such as telemedicine for episodic care, artificial-intelligence-based symptoms triage, ‘text a doctor’ apps and virtual office visits with a patient’s own primary care doctor.


“The pandemic has proven not only that we need virtual care, but that providers and patients will embrace it once they try it,” said Ms. Watts.


Other enhancements planned for 2021 by responding employers include voluntary benefits (22%), such as critical illness insurance or a hospital indemnity plan and adding or improving behavioral healthcare resources (20%). More than half of employers (59%) have provided managers with training on how to support employees’ emotional and behavioral health since the onset of the pandemic, or are planning to do so.


With schools and daycare schedules disrupted across the country, 45% of responding employers are permitting flexible schedules to allow parents to care for children during daytime working hours. However, even among the largest employers (5,000 or more employees, who tend to offer more generous benefit programs), just 16% provide a financial subsidy for in-home childcare, and only 12% provide a back-up childcare benefit.


“Many employers are avoiding health plan changes that impact employees this year, but they know managing cost must remain a priority,” said Ms. Watts. “Plan member stress and care avoidance in 2020 may result in higher utilization in 2021, and struggling health systems may seek to recoup lost revenue through higher prices. On the plus side, the momentum behind digital health innovation is driving towards greater efficiency, better health management and greater member satisfaction.”



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