Employers expected to be hit by 6.5% increase in health care in 2023

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Employers are expected to pay significantly more for employee health insurance in 2023. A study by professional services firm Aon estimates a 6.5% increase, which would translate to an average of $13,800 per employee.

The 6.5% increase is double the 3% most employers saw in 2021 and 2022, but still well below the headline inflation rate of 9.1%. During the pandemic, many employees were postponing or skipping care, leading to lower claim rates. Now that medical claims are increasing to more normal levels, inflationary costs are taking effect.

“In stark contrast to past decades, we measure that U.S. employer health care budgets will be nearly three times lower than the Consumer Price Index this calendar year,” said Debbie Ashford, chief actuary for healthcare solutions in North America at Aon. in a report. “Despite this historic event, employer healthcare costs are expected to increase by 6.5% in 2023 due to economic inflationary pressures.”

New technologies, the severity of catastrophic claims, blockbuster drugs and the growing share of specialty drugs are other factors contributing to increasing pressure on healthcare trends.

For 2022 health plans, costs to employers rose 3.7%, while employee premiums from paychecks were expected to see a more modest increase of 0.6% from 2021 , according to the company’s analysis. Plan costs represent the combined employer and employee premiums for medical expenses and prescription drugs, but exclude direct employee payments such as deductibles, co-payments and coinsurance. On average, employers subsidize about 81% of the cost of the plan, while employees pay the rest.

“In what remains a tight labor market, employers are absorbing most increases in health care costs,” Ashford said. “Employers have a higher budget due to uncertainty and the anticipation that inflationary pressures will increase the cost of health care services.”

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