Consulting companies with expertise in benefits are projecting that employers should expect higher benefits increases in 2024 — in the range of 5.4 percent to 7 percent. The days of three percent benefit increases and shifting costs to employees are over for now.
According to the International Foundation of Employee Benefit Plans (IFEB), the median increase for medical plan costs is expected to increase by seven percent. The primary reasons for cost increases are increased utilization due to chronic health conditions, catastrophic claims and specialty health care issues, and costly prescription drugs, including cell and gene therapy. Please see the chart below.
However, only 16 percent of companies that responded to the IFEB survey said they are planning to shift these costs to employees through higher deductibles, coinsurance, copays, and premium increases.
Instead, companies are more concerned about being able to attract and retain employees with competitive health care benefits.
The leading initiative to hold down increases in health care benefit costs, with 22 percent of responding companies, are utilization controls, such as prior authorizations, case management, disease management and nurse advice lines. Wellness programs are planned by 13 percent of companies.
Other strategies to control cost increases include having dependent eligibility audits, offering high-deductible health plans, or requiring spousal surcharges or carve-outs at 12 percent. The same percentage of companies are planning purchasing and provider initiatives, such as offering telemedicine, price transparency tools, and centers of excellence for employees. Please see the IFEB chart below.
IFEB’s survey was concluded in early August and includes 171 employers. About 43 percent of the employers surveyed have 500 to 2,500 employees.
Mercer Findings
Mercer reported in May that employers faced a 5.4 percent increase in health care costs in 2023, a sharp increase from the annual three percent increases of the past decade. Mercer predicts that the trend of higher benefit costs will continue into 2024 at 5.4 percent or more.
Given the outlook for faster cost growth, employers might be expected to start to pull back on health benefit offerings. However, based on results from Mercer’s Survey on Health and Benefit Strategies for 2024, fielded in February and March of this year, that doesn’t seem to be the case.
With the labor market still tight in many industry sectors, nearly two-thirds of large employers (those with 500 or more employees) say they are planning to make enhancements to their health and well-being offerings in 2024 to support attraction and retention and better meet employee needs. Over a fourth have made enhancements within the past two years.
The new survey also asked employers if they expect to make health plan design changes in 2024 that would shift more cost to employees through higher deductibles, copays, or out-of-pocket limits. While about half may raise cost-sharing amounts somewhat, only three percent say that they will shift enough cost through plan design changes to lower their projected cost increase, and 45 percent will not increase cost-sharing at all. Please see Mercer’s chart below.
Employers should expect higher health care costs in 2024 due to inflation, higher use of health care plans by employees and their dependents for chronic care, and more costly pharmaceutics and cell therapy treatment plans. The dominant employer strategy for 2024 is to tinker with benefit plans to fill in the gaps of what employees say they need, like more flex-time or subsidized meals at work or phone-internet costs — and not to shift costs to employees.
About Victor Assad
Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and Managing Partner of InnovationOne, LLC. He works with organizations to transform HR and recruiting, implement remote work, and develop extraordinary leaders, teams, and innovation cultures. He is the author of the highly acclaimed book, Hack Recruiting: The Best of Empirical Research, Method and Process, and Digitization. He is quoted in business journals such as The Wall Street Journal, Workforce Management, and CEO Magazine. Subscribe to his weekly blogs at http://www.VictorHRConsultant.com