Employers in the United States are bracing for the most substantial surge in healthcare expenses in a decade for the year 2024, as projected by healthcare benefit consultants. However, the tight labor market might mitigate some of this increase for the employees. Healthcare benefit consultants, including Mercer, Aon, and Willis Towers Watson, predict that employers will witness a rise in healthcare costs ranging from 5.4% to 8.5% in 2024, driven by factors such as medical inflation, a high demand for costly weight-loss drugs, and the increased availability of expensive gene therapies. In a Mercer survey, it was revealed that more than two-thirds of employers do not intend to transfer the full extent of the cost increase to their employees or plan to pass on less than the projected cost hike for the year 2024. Mercer is a subsidiary of Marsh McLennan.
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 and Benefits Research.The U.S. economy has grappled with high consumer prices in the past year due to inflation resulting from pandemic-era spending levels and supply chain shortages. Inflation rose to 3.7% over the 12 months leading up to August, a decrease from the 40-year high of 9.1% in June 2022.However, cost increases in the healthcare sector typically lag behind economy-wide inflation because of contracts between insurers and providers, such as hospitals, which fix prices for various procedures and are agreed upon months or even years in advance.
Benefit consultants assist medium and large-scale employers in designing healthcare coverage plans for their employees. Approximately two-thirds of the U.S. workforce receives their benefits through such plans.Aon has projected an 8.5% increase in employer healthcare costs for the coming year, with weight-loss drugs accounting for 1 percentage point of the total increase. The rise in demand for costly weight-loss drugs, including Novo Nordisk’s Wegovy (approved for obesity treatment), as well as the “off-label” use of similar diabetes drugs like Novo’s Ozempic and Eli Lilly’s Mounjaro for weight loss, has significantly contributed to this increase over the past year.In the last year, approximately half a dozen gene therapies have gained approval from U.S. regulators for use. Most of these therapies are priced at over $1 million each, a factor that consultants have pointed out could substantially elevate costs for a company if even a single employee undergoes gene therapy treatment.
All the consultants emphasized the growing utilization of artificial intelligence (AI) by employers to minimize administrative staff costs. They also emphasized a heightened focus on reviewing coverage for high-cost therapies.Both businesses and insurers are actively seeking out more cost-effective hospital networks for specific medical procedures. Janet Faircloth, Senior Vice President of Aon’s health innovation team, mentioned, “Employees are incentivized such that choosing certain networks results in lower costs.”
Over the past decade, healthcare costs have experienced a consistent upward trajectory in many parts of the world. Factors contributing to this trend include medical inflation, advancements in medical technologies and treatments, an aging population requiring more healthcare services, and the increasing prevalence of chronic diseases. Additionally, lifestyle changes and shifts in healthcare policies have also impacted the overall cost structure.In the United States, for example, healthcare costs have shown a notable rise over the last decade. The cost of health insurance premiums, medical services, prescription drugs, and hospitalization has increased substantially. This surge can be attributed to multiple factors such as the high cost of medical procedures, expensive medications, administrative expenses, and the expense of managing chronic conditions.Healthcare providers and policymakers are continuously seeking ways to address the escalating costs, focusing on strategies like improving healthcare efficiency, implementing preventive care measures, encouraging the use of generic drugs, and promoting healthier lifestyles to reduce the burden of chronic diseases. In the upcoming years, finding effective solutions to manage and mitigate healthcare costs will remain a critical challenge for healthcare systems globally.
