According to forecasts from healthcare consultants, US employers should be preparing for the biggest increases in health insurance costs in a decade next year. However in the tight labor market, workers may find they are spared from being forced to absorb all the costs.
Mercer, Aon and Willis Towers Watson have issued a statement saying their benefit consultants forecast that in 2024, employer healthcare costs will increase 5.4% to 8.5% due to medical inflation, soaring demand for costly weight-loss drugs, and wider availability of high priced gene therapies.
Mercer, a unit of Marsh McLennan, conducted a survey which found that over two-thirds of employers will either not shift the costs to their employees, or they will pass on less than the forecasted rise in 2024.
Beth Umland, Mercer’s director of health & benefits research said, “They don’t want to add more financial stress on employees who are also coping with inflation, especially in this time where they’re really relying on their health benefits as a way to keep employees working for them.”
In the 12 months through August, US consumer prices accelerated 3.7%, down from last year’s high of 9.1% in June. However, since contracts between insurers and hospitals for the prices of treatments and procedures are settled months or even a year in advance, inflation of medical costs will often lag general inflation.
Benefit consultants consult on setting the specific benefits for health insurance plans for medium and large employers. Roughly two-thirds of workers in the US receive their benefits through such plans.
Of the 8.5% increase projected in healthcare costs for employers in the coming year, Aon is predicting a full percentage point will come just from weight-loss drugs.
Over the last year, demand has surged for a number of diabetes drugs which are being prescribed off-label for weight-loss, such as Novo Nordisk’s Wegovy, Novo’s Ozempic and Eli Lilly’s Mounjaro.
Over the past year, approximately half a dozen gene therapies, were approved in the United States, most of which cost over $1 million. The consultants noted that even just one employee availing themselves of a single gene therapy can significantly increase the healthcare costs for a company.
All of the consultants agreed that as employers look for ways to mitigate the rising costs, they will increasingly turn to using artificial intelligence to aid them in cutting administrative staff expenses. They added that they expect to see more scrutiny on coverage for any expensive therapies.
Insurers and companies are also looking to find less expensive hospital networks for specific procedures.
Janet Faircloth, senior vice president of Aon’s health innovation team said, “Employees are given incentive that says if you go here, you pay less.”
