Employers Expect an Increase in Health Benefit Costs for 2022

Employers expect health benefit costs to rise 4.7% on average in 2022 compared to 2021, according to early results from Mercer’s National Survey of Employer-Sponsored Health Plans 2021. The increase, based on 1,502 employer responses since mid-June, is in line with the average annual cost growth in recent years except for a dip in 2020 as many people delayed or went without care in the early months of the pandemic.

Employer-sponsored health plans face many unknowns in developing cost projections for 2022.

Sunit Patel, Mercer’s chief actuary for health and benefits, said in a release from Mercer, that one issue is that people have been deferring or cancelling care for the past two years and, while that lowers cost in the short term, it can increase cost over the longer term when medical conditions are diagnosed later or left untreated for too long.

“It’s also difficult to make assumptions about the cost for COVID-related care – particularly long COVID – and for expensive new gene therapies,” Patel said. “On top of that, healthcare prices are being impacted by labor shortages, wage inflation, supply constraints and the new transparency requirements.So it’s not surprising that we’re seeing wide variations in cost projections for next year.”

Cost management takes a back seat to the need to support employees

Last year, as disruptions in healthcare utilization held down cost growth, fewer employers than usual took cost-savings measures that shift healthcare expense to employees, such as raising deductibles or copays. That trend is continuing, despite healthcare utilization and spending beginning to return to pre-COVID levels. The percentage of employers making these types of cost-shifting changes to their plans has fallen again, with only 38% making changes to shift cost in their medical plans in 2022, down from 47% that chose not to shift cost in 2021.

In addition, employers on average will not increase employees’ share of the cost of coverage in 2022. On average, employees will pick up 22% of total health plan premium costs in 2022, unchanged from 2021.Among the largest employers (those with 20,000 or more employees), nearly a third (32%) will actually decrease the share of the premium contributed by employees in 2022, while only 17% will increase it.

“Employers understand that healthcare affordability is a real issue for many employees, especially for lower-wage workers,” said Tracy Watts, Mercer’s National Leader for Healthcare Policy. “They are looking at a range of strategies that will keep more money in employees’ paychecks and remove cost barriers when care is needed.”

For some employers, especially the largest, improving affordability for lower-wage workers is part of a longer-term focus on addressing health inequities and the social determinants of health.Half of all respondents with 500 or more employees — and 65% of those with 20,000 or more employees – say this will be an important or very important priority over the…