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Average per-worker cost of health benefits rose by 5.2% in 2023: survey



Dive Brief:

  • The average per-worker cost of employer-sponsored health insurance rose by 5.2% this year, reaching more than $15,700, according to a survey by consulting firm Mercer. 
  • Smaller businesses face even sharper cost hikes. On average, costs rose 7.8% for employers with 50 to 499 employees. And the average per-employee cost was $16,464 for those smaller companies, compared with $15,640 from workplaces with 500 or more employees.
  • Inflation is a contributing factor to rising prices, but prescription drug spending spiked 8.4% in 2023, according to the survey. New developments in the pharmaceutical market — like the emergence of pricey weight loss drugs — are likely to have a “longer-term impact” on health benefit costs, said Sunit Patel, chief health actuary at Mercer.

Dive Insight:

Employer-sponsored insurance is the single largest source of health benefits in the U.S. But premium costs for both workers and their employers have increased over the past two decades, which could make it more challenging for patients to pay for their care.

Forty-three percent of working-age adults covered by their employers said it was difficult to afford healthcare in a recent survey by the Commonwealth Fund. 

Employers have also raised concerns about their health plans’ ability to provide high-quality care, with most firms giving their plans “C” grades on overall quality, cost-effectiveness and value, according to a Leapfrog Group report from earlier this year. 

The Mercer survey, which included nearly 2,000 public and private employers, found some companies are attempting to address affordability by offering a range of health plan options. Sixty percent of large employers offered three or more plan choices to workers at their largest sites.

This year, companies also didn’t do much cost shifting to their workers, according to the survey. The average in-network PPO deductible rose by $2 in 2023. 

But employers are projecting another 5.2% cost spike next year, a contrast from the 3.2% seen last year. Providers usually have multi-year contracts with insurers, so employers likely didn’t see as much impact from inflation last year. 

“It may take another couple of years for price increases stemming from higher healthcare sector wages and medical supply costs to be felt across all health plans,” Patel said in a statement. 

Prescription drug costs drive health benefit increases in 2023

Average annual change in cost per employee for prescription drugs and overall health benefits, 2019-2023

Prescription drug costs climbed in 2023, rising 8.4% compared to 6.4% last year. New glucagon-like peptide 1 (GLP-1) drugs for diabetes and obesity are part of the increase. The medications could benefit a wide swath of people, but come at a high cost and must be used long term to be effective. 

New gene and cell therapies are beginning to make an impact too, according to the Mercer report. The one-time treatments could add a new challenge for employers, as they’ll need to manage the entire cost of a regimen at once. 

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