More than 154 million Americans rely on employer-sponsored health insurance, but upcoming changes may see many of them facing significantly higher costs. A recent survey by Mercer, which gathered insights from over 1,700 organizations, indicates that employers expect to increase their health care spending by nearly 9% per employee for the same benefits package—the most substantial increase in 15 years. Consequently, employees may experience paycheck deductions rise by approximately 6% to 7% on average, alongside potential increases in co-pays and other out-of-pocket expenses.
The pressures on employers stem from escalating health care expenses, which many attribute to various factors including rising drug prices, increased demand for medical services post-COVID-19, and a contraction of competition among health care providers due to mergers and consolidations. Notably, 59% of employers surveyed indicated plans to pass these costs onto employees through measures such as higher deductibles and co-pays.
Larry Levitt, executive vice president for health policy at KFF, highlighted the current health care cost environment as a “perfect storm,” where employers are compelled to respond to rising insurance premiums by shifting expenses to workers. With the cost of health care increasing at a rate not seen in years, employees may find their take-home pay diminished due to soaring health benefits costs.
What’s more, despite some new pharmaceutical advancements that provide effective treatments, these innovations come at a premium, further driving costs upwards. Consumer hesitancy to seek non-urgent care during the pandemic has also contributed to the sudden spike in demand, exacerbating the situation.
Currently, the average employer spends more than $19,000 annually to provide family coverage, with employees contributing around $6,000 — a total premium that has surged by 52% over the past decade. Beth Umland, Mercer’s director of health and benefits research, commented that while employers have tried to minimize passing costs onto workers due to a competitive labor market, sustained high expenses have left little room for maneuvering.
Health benefits are seen as part of total employee compensation, meaning that increased spending on health care could result in reduced salary increments in other areas. Workers often lack bargaining power over healthcare costs compared to traditional salary discussions, leaving them with limited options as employers look to balance their budgets amidst climbing health care expenditures.
This situation underlines a critical aspect of the U.S. health care system: the extent to which employers dictate health care costs for the majority of individuals under 65. With the current trajectory of rising costs, employees may need to prepare for an extended period of heightened financial pressure when it comes to their healthcare expenses.
