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Report: Employer health costs expected to rise 6.5% next year

Written on Aug 26, 2022

U.S. employers will pay 6.5% more on average for employee health care coverage in 2023 compared to this year, according to a new report from Aon.

The predicted rise is expected to outpace the prior increase of 3.7% growth in employer costs between 2021 and 2022. Though it is expected to remain below the 9.1% Consumer Price Index, a figure reflecting inflation.

Inflation typically hits health care costs later than other goods and services due to the multi-year nature of contracts between providers and insurers, but impacts will become more prevalent over the year, according to the report.

While most industries are able to pass higher prices they pay for materials and other resources directly onto consumers when inflation hits, health care providers are locked into years-long contracts with insurers.

It’s unclear how long it will take for inflation to fully be reflected in health care costs, though it will likely take a few years until most insurance contracts have been renegotiated, according to a Kaiser Family Foundation and Peterson report.

“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,” Debbie Ashford, the North America chief actuary for health solutions at Aon, said in a release.

But still, some inflationary effects will be felt by employers next year as they see larger increases in health plan costs than in years past, according to the report, based on Aon data from about 700 U.S. employers. 

In the first year of the pandemic, medical claims were muted as patients skipped or delayed care amid stay-at-home orders and reluctance to visit medical settings. Claims have slowly returned to more typical levels for employers, according to the report.

The report did not detail employees’ expected health care plan cost growth in 2023.

This year though, employees are on average contributing about $4,412 for coverage, with $2,520 paid through premiums from paychecks, and the remaining $1,892 paid through deductibles, copays and coinsurance, according to Aon.