- Average costs for employer-sponsored health insurance rose 6.3%
in 2021 to reach $14,542 per employee, following last year’s
increase of just 3.4%, according to a Mercer survey
- Employers halted traditional cost management strategies – like
shifting cost to employees - as they focused on improving health
care affordability and access to mental health care for their
workforce
- In a tight labor market, employers can optimize health benefit
value with quality initiatives, virtual care and personalization of
benefits
The average per-employee cost of employer-sponsored health
insurance jumped 6.3% in 2021 as employees and their families
resumed care after avoiding it last year due to the pandemic,
according to Mercer’s 2021 National Survey of Employer-Sponsored
Health Plans, released today. With the highest annual increase
since 2010, health benefit cost outpaced growth in inflation and
workers’ earnings through September, raising the question of
whether employers are seeing a temporary correction to the cost
trend (following last year’s increase of just 3.4%) , or the start
of a new period of higher cost growth.
Employers are projecting – on average – a fairly typical cost
increase of 4.4% for the year ahead. “Employers seem optimistic
that this year’s sharp increase is simply a result of people
getting back to care,” said Mercer’s chief actuary, Sunit Patel.
However, he cautions that a number of factors could result in
ongoing cost growth acceleration. “At the top of the list of
concerns are higher utilization due to “catch-up” care, claims for
long COVID, extremely high-cost genetic and cellular drug
therapies, and possible inflation in healthcare prices,” he
says.
Cost growth was sharper among smaller employers (50-499
employees), at 9.6%, while larger employers reported average cost
growth of 5.0%. Smaller employers are more likely to offer fully
insured health plans, suggesting that insurance carriers expected
significantly higher cost in 2021 relative to 2020.
Additionally, spending on prescription drugs rose 7.4% in 2021
among large employers (those with 500 or more employees), driven by
an increase in spending on specialty drugs of 11.1%.
Employee cost-shifting comes to a halt in 2021
When health benefit cost growth accelerates, employers typically
ratchet up cost management efforts to keep increases at sustainable
levels. However, one traditional cost management tool known as
“cost shifting” – where employers shift a larger share of the cost
of health services to plan members – seems to be off the table for
many employers.
In fact, concerns about health care affordability for lower-wage
workers, along with the need to retain and attract employees in a
competitive labor market, have resulted in an unexpected reversal
in some health plan cost-sharing trends. Most employers not only
held off on raising deductibles and other cost-sharing provisions,
but some even made changes to reduce employees’ out-of-pocket
spending for health services. Among small employers (50-499
employees), the median deductible for individual coverage in a PPO
dropped from $1,000 to $900 in 2021. Among large employers, the
median individual deductible in an HSA-eligible plan dropped from
$2,000 to $1,850 in 2021.
Nationally, 40% of all covered employees enrolled in a
high-deductible consumer-directed plan in 2021, up from 38% in
2020. However, most large employers that offer a CDHP at their
largest worksite (86%) also offer employees another medical plan
choice with a lower deductible.
Additionally, large employers did not increase employee premium
contributions significantly in 2021. The average monthly paycheck
deduction rose by just $7 for employee-only coverage (from $160 to
$167) and by just $12 for family coverage (from $590 to $602) in
PPO plans, the most common type of medical coverage offered.
Prioritizing employee support
Benefit priorities have shifted in response to the pandemic’s
impact on the workforce and evolving benefits landscape. Many
employers view supporting the mental, emotional and behavioral
health of employees as a business imperative. Based on the survey
results, adding or expanding programs to increase access to
behavioral healthcare is a top-three priority for all large
employers (74% rated it important or very important) – and it is
the number one priority for employers with 20,000 or more employees
(86% rated it important or very important).
“In today’s extremely tight labor market, generous health
benefits can help tip the scales in attracting and retaining
staff,” says Tracy Watts, National Leader for U.S. Health Policy at
Mercer. “Beyond that, in the wake of the pandemic many employers
committed to help end health disparities, and ensuring care is
affordable for their full workforce is an important part of
that.”
The survey found that nearly half of all large employers – and
about two-thirds of those with 20,000 employees -- say that
addressing health equity and the social determinants of health will
be an important priority over the next 3-5 years.
Managing health benefit cost without shifting cost to
employees
Looking ahead to 2022, the majority of plan sponsors (60%) say
they will not make plan changes of any type to reduce their
expected cost increase. This is largely due to employers focusing
their attention on enhancing benefits to support employees and stay
competitive in a tight labor market, but the sharp cost increase
suggests a need to prioritize how they will manage costs.
“The tough challenge of solving for both health care cost and
health care affordability means maximizing value and accepting the
disruption it may bring,” says Ms. Watts. “Three key components of
value are quality, delivery, and personalization.”
Steer to quality During the health system disruption of
the past two years, employers have been less able to pursue quality
initatives that seek to drive members to high-performing providers,
such as centers of excellence and accountable care organizations
(ACOs). Ms. Watts suggests that employers need to resume these
efforts, but with a new emphasis on convenience.
“Value starts with quality providers that achieve good outcomes,
but convenience must be part of the equation, along with affinity.
People want to get their care through the channels they are most
comfortable with, and that’s not always a doctor’s office. It might
be a pharmacy, a retail establishment, or online.”
Balance virtual and in-person delivery of care
Convenience is major advantage of virtual health care, which can
also serve to improve access without adding cost. Employees are
more open to virtual care than ever before. With in-person health
care severely limited during the worst of the pandemic,
telemedicine clearly got a boost: utilization rates had stagnated
at 9% or less among large employers for many years; it jumped to
15% in 2020 and has held at 12% during the first half of 2021.
However, virtual care also encompasses a wide range of digital
health solutions that don’t rely solely on real-time interactions
with a live health care professional. Targeted health solutions
that address specific health conditions such as diabetes or
musculoskeletal are now offered by 25% of all large employers and
another 20% are considering adding them. Such programs can save
money for both the employer and the employee by substituting
at-home care – for example, online physical therapy – for in-person
visits. A virtual Primary Care Physician (PCP) network or service
is offered by 16% of large employers, with 10% considering. And 28%
of all large employers (and 43% of those with 20,000 or more
employees) offer a virtual behavioral health care network.
Personalize benefits to optimize value for individuals
Digital health solutions can be an affordable way for employers to
add variety to their offerings and allow employees to personalize
their benefit packages to maximize the value to them. For example,
while only a small portion of the workforce might use a fertility
program, it could have a big impact in their lives; the same is
true of online resources for parents of children with autism, or
benefits for treatment of gender dysphoria.
And, Ms. Watts adds, “In today’s environment of varied working
situations, employers see this type of personalization as a way to
“even out” the benefits available across onsite, remote, and hybrid
workers.” Nearly one in five employers that expect more employees
to work remotely (18%) say that they have added voluntary benefits
specifically for this reason. The prevalence of pet insurance,
legal benefits, student loan repayment and ID theft programs all
rose in 2021.
Survey Methodology
Mercer’s National Survey of Employer-Sponsored Health Plans
included 1,745 public and private employers in 2021. Based on
responses from a subset of employers in a national probability
sample in combination with a non-probability sample, survey results
have been weighted (using employer size and geographic
stratification) to represent the approximately 184,000 employer
health plan sponsors across the US with 50 or more employees. These
organizations employ about 118 million full- and part-time
employees.
The full report on the Mercer survey, including a separate
appendix of tables of responses broken out by employer size, region
and industry, will be published in March 2022. For more
information, visit www.mercer.com/health-benefit-trends.
About Mercer
Mercer believes in building brighter futures by redefining the
world of work, reshaping retirement and investment outcomes, and
unlocking real health and well-being. Mercer’s approximately 25,000
employees are based in 43 countries and the firm operates in 130
countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the
world’s leading professional services firm in the areas of risk,
strategy and people, with 81,000 colleagues and annual revenue of
over $19 billion. Through its market-leading businesses including
Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients
navigate an increasingly dynamic and complex environment. For more
information, visit mercer.com. Follow Mercer on LinkedIn and
Twitter.
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version on businesswire.com: https://www.businesswire.com/news/home/20211213005119/en/
Micaela McPadden Micaela.mcpadden@mercer.com
201-694-9719
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