The costs employers will incur providing health care to employees are expected to increase by 5.6% next year, according to early results from consulting firm Mercer’s latest survey of employers.
In the report, which was released June 22 and remains open, 864 employers across the nation responded by Aug. 4. The 5.6% cost increase for next year is significantly higher than the 4.4% increase that was predicted for this year, and 2023’s predictions still lag behind national inflation rates. Mercer predicted that employers have not fully felt the effects of inflation. The 5.6% prediction reflects changes employers would make to “hold down” costs.
“Because health plans typically have multiyear contracts with health care providers, we haven’t felt the full effect of price inflation in health plan cost increases yet. Rather it will be phased in over the next few years as contracts come up for renewal and providers negotiate higher reimbursement levels,” said Sunit Patel, the company’s chief actuary for health and benefits. “Employers have a small window to get out in front of sharper increases coming in 2024 from the cumulative effect of current inflationary pressures.”
Mercer does not have specific data on New York employers’ responses yet.
Eric Linzer, chief executive of the New York Health Plan Association, which works with 29 employers across the state that provide coverage for 8 million New Yorkers, said the rising costs of providing benefits are “inextricably tied” to the rising costs of health care—which won’t be going away anytime soon.
Linzer cited higher prices that doctors, hospitals and pharmaceutical companies are charging for care and drugs; ongoing costs for Covid-19 testing, treatments and vaccines; and legislative moves that drive up the cost of insurance, such as the $6.5 billion the state collects on health plan taxes annually.
Despite the rising costs, Linzer said, members of the association remain focused on providing quality care for their employees.
Survey results echo that. According to Mercer, employers are prioritizing increasing the benefits they provide next year while focusing on affordability for employees. Most employers reported they would not raise employees’ deductibles or copays. While 36% of employers said they would make cost-cutting decisions next year, that is down from 40% this year and 47% last year.
Mercer’s survey suggested that employers will not be increasing workers’ share of the cost of coverage next year. Large employers—companies with 500 or more workers—reported their employees would have to pick up 22% of health care premiums through paycheck deductions. That holds stable from this year and last year.
Candice Sherman, chief executive of the Northeast Business Group on Health, which is based in the Financial District, said the group’s members are focused on providing care that takes the impact of the last two years into account.
“Prioritizing benefits to retain and attract employees is definitely what we are hearing from our members,” Sherman said. “Employers are also keenly aware of the toll the pandemic and sociopolitical issues have had on overall employee health and well-being, including mental health, and want to ensure they are offering and communicating about a continuum of support, including a robust EAP and digital options.”
She added that making sure care is affordable for employees with lower incomes is a priority as well.
Linzer said the same for employers in his association, adding that many are trying to negotiate better reimbursement rates with doctors, hospitals and pharmacies.
Patel told Crain’s that health care costs are likely to soar next year, and Mercer expects employers will need to change the way their employees seek and get care.
“Strategies may include promoting the use of higher quality providers,” he said, “leveraging technology [such as] virtual health [and] remote monitoring and improved clinical management.”
Although Mercer said the Covid-19 pandemic’s impact on the price of care has been “fairly modest” thus far, that could change.
“We do expect that as provider contracts are renegotiated (which will be accompanied with larger increases than in the recent past), new, expensive gene and cellular therapies are introduced and staffing shortages ease, these will add to the growing cost pressures,” Patel said.
The predicted 5.6% jump in the cost of providing care next year would not be as significant as the increase in 2021, when employers’ costs rose by 6.3% to an average of more than $14,500 per employee. New York has the highest price of care per employee—more than $17,000 in 2021, Mercer reported.
Mercer, which is headquartered in Midtown, is a subsidiary of global firm Marsh McLennan. —Jacqueline Neber and Maya Kaufman
Racial disparities in healthcare have become point of focus for employers during the pandemic, not least because of COVID-19’s impacts. According to a February analysis by Kaiser Family Foundation, cumulative data showed that Hispanic individuals represented a larger share of COVID-19 cases relative to the total population, whereas Black individuals represented a slightly higher share of deaths compared to the total population.
Other diseases show similar disparate impacts. According to a March 2022 report published by the Northeast Business Group on Health, Black, Indigenous and people of color populations had disproportionate rates of obesity and diabetes. The report also found that inequities in care access were a major driver in health disparities.
What they're saying: "It's a serious issue for employers," said Candice Sherman, the CEO of the Northeast Business Group on Health. The group represents roughly 80 large companies such as American Express, Colgate, Moderna and Pfizer.
In a flipbook promoting health equity in employers’ diabetes and obesity intervention efforts, the Northeast Business Group on Health (NEBGH) recommended that employers take seven steps to ensure that their interventions are designed and implemented with health equity in mind.
These steps included incorporating the chronic disease interventions into overarching diversity, equity, and inclusion strategies, assessing programs for care gaps and inequities, reducing financial barriers to chronic disease prevention and management tools for minority populations, and adopting a value-based insurance design.
In April, the Northeast Business Group on Health, an employer-led coalition of business leaders and healthcare stakeholders, released “Obesity, Diabetes and Racial Health Equity: What Employers Can Do.” The guide is intended to help employers improve benefits-related outcomes for employees with obesity and diabetes, a commonly associated condition, with a special focus on employees of color.
“The science of obesity is unequivocal that obesity is a disease, not an individual’s fault or merely a product of lifestyle choices or environmental conditions,” the guide stated. “People with obesity are often viewed as lacking willpower or self-control and having psychological problems that limit their ability to restrict food intake.”
The weight stigma that arises from misunderstandings about the condition isn’t just a psychological tax on workers with obesity, the guide noted. It also results in underuse of healthcare benefits that can treat the condition and potentially improve their quality of life.
When it comes to obesity and diabetes benefit design, employers can—and should—adopt a health equity mindset, according to a flipbook from the Northeast Business Group on Health (NEBGH).
“Obesity and diabetes disproportionately affect people of color,” the flipbook emphasized. “Racial and ethnic disparities are pronounced in both the prevalence and treatment of obesity.”
The flipbook noted that Native Americans are twice as likely as White people to have diabetes and Black Americans are 50 percent more likely to have type 2 diabetes, which is the predominant type of diabetes and is capable of going into remission, unlike type 1 diabetes.
Employers can lower their healthcare costs by focusing on Black, Indigenous and people of color (BIPOC) populations. Reason: A disproportionate number of people in BIPOC populations suffer from obesity and diabetes, and have poor outcomes from COVID-19.
That’s why Northeast Business Group on Health (NEBGH) created the guide “Obesity, Diabetes and Racial Health Equity: What Employers Can Do.” The guide’s purpose is to help HR and Benefits pros develop and implement strategies aimed at achieving racial equity in obesity and diabetes prevention, treatments and outcomes.
Employers have long been focused on addressing obesity and diabetes in their workforces.
However, COVID-19 is pushing them to think about these health challenges in new ways, in particular putting a spotlight on the need to address them among populations of color. To assist in that effort, the Northeast Business Group on Health has released a new guide for employers looking to tackle obesity and diabetes through a racial lens.
"Obesity, Diabetes and Health Equity: What Employers Can Do" lays out a step-by-step approach. Key among them is embedding health outcomes within other diversity, equity and inclusion efforts. Another big recommendation is to build benefits to address obesity and diabetes that are based in clinical best practices.
In February, the nonprofit Northeast Business Group on Health (NEBGH), representing employers that sponsor health benefit plans, released Social Determinants of Health: A Guide for Employers, to help HR and benefits leaders identify and address the health-related social needs of employees and their families.
"Employers have routine, frequent contact with their employees, determine what benefits employees can receive, and can access information that may point to social needs affecting employee health, well-being and productivity at work," said NEBGH CEO Candice Sherman.