The average U.S. health care costs that an employer pays for employee benefits will rise 6.5% to more than $13,800 per employee in 2023, according to Aon, a global leader in professional services.
This projection is more than double the 3% increase in healthcare budgets that employers experienced from 2021 to 2022; but is significantly lower than the inflation figure of 9.1 reported by the Consumer Price Index.
On average, budgeted health care costs for clients are $13,020 per employee in 2022. The analysis uses the company’s Health Value Initiative database, which collects information on nearly 700 U.S. employers representing about 5.6 million employees.
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Medical claims were scrapped for most employers in the first year of the COVID-19 pandemic, a time when many treatments were postponed or skipped during quarantines. Employers have seen the medical claims experience return to more typical levels of growth and anticipate inflationary cost pressures in the coming year.
“In stark contrast to the past few decades, we measure that health care budgets for U.S. employers will be nearly three times lower than the Consumer Price Index this calendar year,” said Debbie Ashfordthe North America Chief Health Solutions Actuary at Aon. “Despite this historic event, employer healthcare costs are projected to increase by 6.5% in 2023 due to economic inflationary pressures.”
Price increases driven by economic inflation are generally slow to show up in medical trends due to the multi-year nature of the typical supplier contract, but will become apparent over the coming year, Ashford added. New technologies, the severity of catastrophic claims, blockbuster drugs and the growing share of specialty drugs are other factors contributing to increasing pressure on healthcare trends.
For 2022 health plans, costs to employers rose 3.7%, while employee premiums from paychecks were expected to see a more modest increase of 0.6% from 2021 , according to the company’s analysis. Plan costs represent the combined employer and employee premiums for medical expenses and prescription drugs, but exclude direct employee payments such as deductibles, co-payments and coinsurance. On average, employers subsidize about 81% of the cost of the plan, while employees pay the rest.
Increase in healthcare costs for US employers from 2021 to 2022
“In what remains a tight labor market, employers are absorbing most increases in health care costs,” Ashford said. “Employers have a higher budget due to uncertainty and the anticipation that inflationary pressures will increase the cost of healthcare services.”
Slight increase for employees in 2022
In 2022, employees contribute approximately $4,412 for healthcare coverage this year, including $2,520 is paid as bonuses on paychecks and $1,892 is paid through plan design features such as deductibles, co-payments and coinsurance, according to the company’s analysis.