In 2024, the cost of work-based health insurance is expected to rise at the fastest rate in years as inflation hits all insurance policies.
Companies plan to absorb most of the cost, but many workers may also feel the impact in the form of higher premiums and additional health care costs, benefits consultants say. Some companies may also limit coverage in a variety of ways to smooth out the steep cost increases.
Employees find out how much more they'll have to pay during the open enrollment period their employers typically hold at this time. This year, workers are shelling out an average of $6,575 for their portion of the annual premium of nearly $24,000 for a family policy and just over $1,400 for their portion of the $8,435 annual cost of single-person coverage, according to KFF, formerly the Kaiser Family Foundation.
According to KFF, nearly 153 million Americans have workplace health insurance, the largest source of coverage.
There are many reasons why health care costs are skyrocketing right now, says Debbie Ashford, chief health actuary for North America at Aon, which is forecasting an 8.5% increase in costs for 2024, nearly double this year's increase.
Price increases account for more than half of this spike. Although inflation peaked last year, in the health sector its impact is often delayed because contracts between insurers and health care providers are usually for several years.
"Although inflation is falling, the trend in health care is accelerating as providers are demanding larger cost increases from insurers to cover the higher payroll and consumable costs they have borne over the past several years but have been unable to pass on to payers," she said.
In addition, she said, Americans are seeing doctors and getting health care again after several years of lull in health care utilization during the Covid-19 pandemic. At the same time, more workers and their families are facing chronic and more costly health conditions, exacerbated by delays in medical care.
In addition, the use of specialty drugs, especially diabetes and weight-loss drugs, has increased significantly. According to Ashford, average monthly spending on drugs in this class roughly doubled from 2022 to this year, which will add about 1 percentage point to next year's increase.
How much more workers will have to pay next year is not yet known. But this year, while employer costs rose an average of 4.5% over 2022, employee premiums increased an average of 1.7%, according to Aon, which examined data from 800 U.S. employers representing about 5.6 million workers. But workers' compensation costs, including deductibles, copayments and coinsurance, rose 5.7%, for a total increase of 3.3%.
Changes in employee benefits
According to Courtney Stubblefield, managing director of health and benefits at WTW, formerly Willis Towers Watson, employers are taking a variety of steps to try to control costs and project that employer costs will rise 6.4 percent in 2024, up from 6 percent this year. More companies are trying to find better deals and lower prices on their health insurance programs from multiple carriers rather than automatically renewing with an existing insurer.
"We will have more changes this year than in previous years because the staff is rethinking and reevaluating their plans," she said. "It's all about finding the lowest cost for all participants and finding the best programs."
Nearly a quarter of employers plan or are considering offering a narrow network of service providers in the next two years, according to a WTW survey of 457 employers with a total of 7.3 million employees.
Nearly one in five plan or are considering implementing a center of excellence program for certain conditions, such as certain orthopedic, cardiology or cancer diagnoses, where employees can receive care from top-rated providers at little or no cost. And 13% are considering offering policies that limit or eliminate non-network coverage for non-emergency care.
Improving mental health benefits is also a top priority for many employers, according to Jim Winkler, chief strategist for the Business Group on Health, which represents large companies from across the state. They are particularly concerned about access to and quality of care, as well as staff burnout.
Nearly two-thirds of employers plan to work with their health plans and outside providers to expand mental health networks by 2024, up from less than half this year and last year, according to the latest survey of 152 companies representing 19 million people. In addition to treatment with psychiatrists and psychologists, companies are offering visits with counselors and life coaches to provide more capacity.
About 44% of employers plan to offer mental health navigation programs to help their employees who need help going through the process. That's up from less than a third this year.
"Employers recognize that demand for mental health care increased during the pandemic and has remained at high levels ever since," he says.
Getting employees to utilize their benefits
Rising costs and a desire to provide more comprehensive benefits are forcing Technology Container Corp. to review its employee health insurance program by 2024, says Melissa Wayne, chief financial officer.
A company that makes reusable plastic boxes also wants to make its benefits more user-friendly. Currently, the company has a $6,000 deductible for single coverage, but reimburses employees up to $5,750 for medical bills. However, the company wants to do away with this practice because it is time-consuming and paperwork intensive, which causes headaches.
Therefore, the Desoto, Texas-based company is considering joining a professional employer organization that will handle all of its benefits, including health, vision, dental, life and disability insurance. This would reduce premiums and the number of administrators that would have to be dealt with.
In addition, a company with 35 employees can switch to a fully insured plan where the employer pays a certain amount to an insurer that covers claims. Currently, the company insures itself, so it pays for its own health care for its employees.
As a result of the changes, Wayne said, employees' weekly premiums may increase by $9 next year, but their medical costs will decrease. In addition, the plan will become easier to use, offer more benefits and cover more procedures.
"We're trying to cut costs," Wayne says, noting that the company recently purchased new equipment that it hopes to fully pay off next year. "But at the same time, we're trying to do the best we can for the employees. We have an aging workforce, and we want people to utilize benefits as much as possible."
According to Cleo Nixon, director of human resources at Whirley DrinkWorks!, which makes promotional drinkware in Warren, Pennsylvania, next year's bonuses will increase by 3% for both the company and employees, the largest increase since 2018.
More employees need medical care this year, including some scheduled surgeries that were postponed because of the pandemic. Some are taking expensive medications, including those for weight loss and diabetes. All of this has driven up costs.
But the company is committed to keeping costs down for its nearly 400 employees so they actually use the services when they need them. The company maintains an annual deductible of $300 and also offers significant discounts on premiums if employees participate in wellness programs, which can reduce monthly costs by as much as $40 for single coverage and $177 for family policies.
"We don't want people to have an excuse not to go to the doctor," Nixon said, adding that it's cheaper to pay for multiple doctor visits than one complicated hospital stay.
In addition, if workers stay healthy, they lose less time at work.
"It repays you in many different ways," Nixon said.