Employer health costs could increase by 6.5% next year, according to a new analysis from Aon.
The researchers found that average costs per employee will reach $13,800 in 2023. This is more than double the 3% increase that employers saw in 2022 but far below the current inflation index, according to Aon.
On average, employers budgeted $13,020 per employee for the 2022 plan year. Much like the rest of the industry, employers saw far lower medical claims costs during the COVID-19 pandemic, with costs returning to more typical growth levels over the past year and inflation likely to play a role in driving up costs moving forward.
"In complete contrast over the last decades, we are measuring that health care budgets for U.S. employers will come in nearly three times lower than the Consumer Price Index this calendar year," said Debbie Ashford, the North America chief actuary for health solutions at Aon, in a release. "Despite this historic occurrence, employer health costs are expected to increase 6.5 percent in 2023 due to economic inflation pressures."
The data come from the firm's Health Value Initiative database, which includes 700 employers with 5.6 million employees in the U.S.
Ashford said that while price increases driven by inflation may not be felt immediately in healthcare due to the long-term nature of provider contacts, they will likely become apparent in the coming year. Other factors driving cost increases include new technology, blockbuster drugs, specialty drugs and severe catastrophic claims.
One key solution for employers looking to address rising costs is to find ways to address chronic conditions, the Aon analysts said. These include long-term illnesses as well as complex diseases, and Ashford said it's not uncommon to see 1% of an employer's plan membership driving 40% of costs.
Plan sponsors should gather more data and use that information to predict where and when these excess costs may arise, Ashford said.
"The effect of chronic conditions has far-reaching implications beyond what we see with health care costs, out to the other areas of the business, like absence and productivity, disability and worker's compensation," said Farheen Dam, Aon's North America health solutions leader, in a statement. "By focusing on chronic conditions, not only are we improving the health and happiness of employees, but we're helping to improve the way they live and work."