Healthcare insurance costs are anticipated to hit a 10-year-high in 2024, but many employers are reportedly willing to bite the financial bullet for their workers, according to a recent survey.
Health benefit consultants from Mercer, under the umbrella of Marsh McLennan, in addition to Aon and Willis Towers Watson estimate employers’ healthcare costs will rise from the current 5.4 percent rate to 8.4 percent next year. They attribute it to medical inflation combined with higher demand associated with weight-loss drugs and expensive gene and cellular therapies.
Inflation was at about 3.7 percent in August, still higher than the Federal Reserve’s goal of bringing it down to 2 percent. Following numerous interest rate hikes that have brought them to their highest level in two decades, the Fed announced no additional increase.
The short-term benchmark interest rate is predicted to stay above 5 percent next year, according to the New York Times, and should decrease to nearly 4 percent by the end of 2025—but still double the final rate of 2019. Medical inflation typically lags consumer inflation due to contracts and procedure costs decided between hospitals and insurers many months in advance.
The survey of over 1,700 employers, published September 7 by Mercer, found that over two-thirds of employers either do not plan to shift any cost increase to their staff or will pass on less than the expected rise in 2024.
“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,” said Beth Umland, Mercer’s director of health & benefits research, according to Reuters.
The projected 5.4 percent increase, of which 1 total percentage point is reflected entirely by drugs pertaining to diabetes and obesity, comes from the likelihood that many employers intend to front costs.
“If they made no changes, respondents indicated that the cost for their largest medical plan would rise by an average of 6.6 percent,” the report states. “The relatively small difference between the size of the projected increases before and after plan changes indicates that most employers are not making cost-cutting changes to their plans, reflecting concerns about employee healthcare affordability.”
Large employers, or those with 500 or more employees, have been able to avoid trickled-down costs to workers. But smaller employers with between 50 and 499 employees that usually offer full insurance plans reported a higher average initial renewal rate of 7.5 percent.
Employers eating these increases make workers less susceptible to looking for other jobs, the survey notes.
When the “Great Resignation” began in the throes of the COVID-19 pandemic, reasons of low pay, disrespect felt by employees and healthcare were often given for quitting or finding a different position.
A third of part-time and full-time workers who receive health insurance through their employer said they would be very or somewhat likely to quit if they got insurance elsewhere, according to a YouGov poll of 1,400 adults in 2021.
That number was higher than in results found in a Gallup poll the previous year when one in six employees said the same thing.
Currently, workers and labor unions remain heavily in the spotlight due to the ongoing SAG-AFTRA and UAW strikes.
On Thursday, Democratic Senator Bob Casey introduced legislation to extend Medicaid coverage to all children by automatically enrolling them in the federal health insurance program at birth. The bill was drafted following Democrats’ urging of President Joe Biden to take action following reports of states disenrolling thousands of Medicaid recipients.
Newsweek reached out to Mercer via email for comment.