Employer-sponsored health care plan costs didn't keep pace with inflation this year, but according to Mercer's 2022 National Survey of Employer-Sponsored Health Plans, we can expect to see health plan costs spike (again) in 2023. 

Employer-sponsored health plan costs in 2022 and beyond

For the survey, Mercer polled 2,028 public and private employers in 2022. The survey results were weighted to represent roughly 170,000 U.S.-based employer health plan sponsors that have 50 or more employees. According to Mercer, these organizations employ around 124 million full- and part-time workers.

In 2022, average per-employee costs increased by 3.2%, rising to $15,013. Among smaller companies with 50 to 499 employees, costs were slightly higher than large companies with 500 or more employees.

While health care costs typically increase at a higher rate than general inflation, they were much lower than this year's rate of inflation, which averaged around 8%. According to Sunit Patel, Mercer's chief health actuary, this year is different because employer health plan sponsors still have not felt the full impact of inflation. 

"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."

In fact, employers are predicting a higher average increase of 5.4% for 2023. According to Patel, employers should also expect to see accelerated cost growth in 2024 and beyond.

What employers are prioritizing in their benefits programs

In the survey, Mercer asked employers to rate their strategic priorities for their benefits programs in the coming years. Before the Covid-19 pandemic, employers most often reported prioritizing cost-management strategies. However, with a tight labor market and ongoing workforce shortages, many employers are now prioritizing improved benefit offerings.

According to Mercer, 84% of large employers said "enhancing benefits to improve attraction and retention" was important or very important to them in 2022. In addition, 73% said they prioritized "adding programs/services to expand access to behavioral healthcare," and 68% prioritized "improving healthcare affordability."

In a recent Mercer survey of more than 4,000 U.S. employees, 68% said they feel challenged in getting needed health care. Notably, most respondents said they struggled to afford health care expenses that weren't covered by their insurance plans, underscoring the importance of affordable health care.

With an emphasis on affordability, most employers tried to avoid "healthcare cost shifting," which places increased responsibility for the cost of health services on plan members through higher deductibles or copays. According to Mercer, the average amount of cost-sharing features did not change significantly in 2022.

The survey also found that fewer employers are offering high-deductible account-based plans as their only option. In particular, very large organizations with at least 20,000 employees have adopted this "full-replacement" strategy quickly, according to Mercer. In fact, only 9% of very large employers offer a high-deductible plan as their only option—a decline from 13% in 2021, and 22% in 2018.

Meanwhile, 34% of very large employers used salary-based premiums in 2022—up from 29% in 2021—which result in smaller deductions for lower-wage workers.

"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, Mercer's national leader for U.S. health policy. "Particularly with inflation putting added stress on household finances, budget concerns need to be balanced with the downstream implications of health care affordability. So the focus now is on strategies to rein in cost growth without shifting the cost to the employee." (Lagasse, Healthcare Finance, 12/14; Emerson, Becker's Payer Issues, 12/9; Minemyer, Fierce Healthcare, 12/8; Mercer press release, 12/8)