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U.S. employers should brace for a 7% hike in healthcare costs next year, fueled largely by chronic conditions, costly prescriptions, and catastrophic claims, according to new data.

The 7% median increase projected for 2024 echoes last year’s prediction for 2023 costs and marks a sizable jump from the 4-5% growth employers foresaw in 2021 and 2022 during the height of the pandemic.

Driving Growth in Health Spending

The International Foundation of Employee Benefit Plans, which surveyed 171 employers in early August, found utilization related to chronic health conditions was the primary driver of medical cost increases next year. Twenty-two percent of respondents cited this factor, followed closely by catastrophic claims, identified by 19%.

These trends may partly stem from employees delaying or skipping regular screenings like mammograms and colonoscopies during COVID-19 shutdowns, leading to later, more serious diagnoses. For example, catching cancer earlier could have meant fewer chronic or catastrophic claims.

Sixteen percent of employers said specialty drugs and cell and gene therapies will contribute to benefit cost hikes in 2024. Fourteen percent pointed to rising medical provider expenses passed onto employers.

Preventive Care Impact Easing

While delayed preventive care during the pandemic seemingly led to costlier health issues, the tendency to continue delaying screenings and check-ups is expected to play a smaller role in 2024’s growth.

Just 4% of employers said higher utilization due to deferred elective and preventive care amid COVID-19 would drive cost increases next year, down from 12% in 2023. This suggests employees continued catching up on these services in 2023.

Still, next year’s 7% rise outpaces pre-pandemic norms. It falls just shy of the 7.4% and 7.5% increases employers projected for 2018 and 2019.

Fewer Costs Passed to Employees

With labor markets still tight, employers appear reluctant to pass heftier benefit expens­es onto workers. Just 16% of respondents said they would share costs by hiking deductibles, co-pays, co-insurance, or premium contribu­tions in 2024, down from 22% last year.

Research from Mercer early in 2022 similarly found that 45% of employers had no plans to pass along added costs to employees.

Competitive benefits packages remain key to attracting and retaining talent. Employers want to avoid pricing themselves out of the market.

Turning to Other Cost Control Measures

Instead of shifting expenses to employees, employers plan to rely more on other cost-containment strategies.

Twenty-two percent said they will focus on initiatives like requiring prior authorization and adding disease management or nurse advice lines. Another thirteen percent cited worksite wellness and health promotion programs as a solution.

Twelve percent pointed to plan design changes, such as dependent eligibility audits, introducing high-deductible options, or spou­sal surcharges. The same share said they would pursue provider-based initiatives like telemedicine, price transparency tools, and designating centers of excellence.

Evaluating Plan Value

With health benefit costs continuing to climb, employers would be wise to evaluate their offerings and utilization patterns to ensure they provide the best value for the investment.

Healthcare expenses projected for 2024 sit well above pre-pandemic norms, and inflation continues to have a broad impact across the health sector. While next year’s 7% rise is on par with recent expectations, it remains a sizable jump.

Vigilantly assessing plan performance and worker health patterns can help identify opportunities for efficiency gains and higher-quality care. Comprehensive benefits audits allow employers to pinpoint waste, ensure worker needs are met, and contain expenses.

As the post-pandemic landscape brings new challenges, actively managing benefits packages remains imperative for employers seeking to provide competitive, affordable coverage.

For more employee benefits resources and industry insights, contact INSURICA today.

Copyright © 2023 Smarts Publishing. This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. 

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