Getting a grip on the future can be a challenging task, especially when it comes to managing finances for businesses. Employers, in particular, have been closely monitoring the trajectory of healthcare costs and pay raises as they prepare for 2024. However, a recent analysis has thrown a curveball into their predictions.
The latest insights from Aon plc, a prominent global professional services firm, paint a challenging picture for U.S. employers in 2024. According to their analysis, the expenses associated with providing healthcare to employees are poised to skyrocket by a substantial 8.5%.
To put this into perspective, it signifies an average cost exceeding $15,000 per employee!
What's even more staggering is that this surge is nearly double the rate observed between 2022 and 2023 (4.5%).
So why is this happening?
According to Aon, the contributing factors for this surge are:
In the context of health plans for 2023, Aon's analysis reveals that employer costs increased by 4.5%, whereas employee premiums deducted from paychecks experienced a more modest 1.7% uptick from 2022. On average, employers cover roughly 81% of the plan cost, leaving employees accountable for the remaining portion, which equates to approximately $4,675. Of this amount, $2,682 is allocated to premiums, while $1,993 is attributed to plan design components, including deductibles, co-pays, and co-insurance.
The prevailing trend shows that employers are still taking on the lion's share of the escalating healthcare expenses, primarily due to their reluctance to transfer significant costs to plan participants, which could potentially render healthcare benefits less accessible.
Nonetheless, it's worth noting that the rate of healthcare cost increases (from 2022 to 2023) varies by industry in the following manner:
In a nutshell, Aon's research indicates the likelihood of healthcare costs rising soon. However, it's important to note that this projected 8.5% increase is subject to employers not implementing cost-saving strategies.
These strategies encompass a range of actions, such as requiring prior authorization, adopting disease management or nurse advice lines, and introducing employee wellness programs. Moreover, altering plan designs through initiatives like dependent eligibility audits, high-deductible health plans, etc., can be instrumental in helping organizations manage and control these escalating costs.
As employers navigate the complex landscape of healthcare expenses, these strategies can play a vital role in mitigating the anticipated 8.5% increase in healthcare costs by 2024.