Health Plan Cost Increases for 2022 Return to Pre-Pandemic Levels

Employers in the U.S. expect their group health plan premiums to increase, on average, between 4.7 percent and 5.2 percent in 2022, even after taking cost-management initiatives into account, according to recent employer surveys. Overall costs for health claims are also expected to rise, health insurers forecast.

Higher Premiums

HR consultancy Willis Towers Watson's 2021 Best Practices in Health Care Survey, based on responses from 378 U.S. employers during June and July 2021, projects a 5.2 percent premium increase in health plans next year—sharply higher than the 2.1 percent increase that occurred in 2020 and larger than 2019's 4 percent increase.

Last year's premium uptick was the smallest in decades and is seen as an anomaly, as many people deferred nonemergency care and embraced telemedicine during the pandemic, Willis Towers Watson reported.

In related findings:

• The total average employer cost, including premiums, rose this year to an estimated $13,360 per employee, up from $12,501 in 2020.
  

• Employee contributions for premiums increased slightly to $3,331 in 2021, up from $3,269 in 2020.

HR consultancy Mercer's Survey of Employer-Sponsored Health Plans 2021 pegs the premium increase figure at 4.7 percent for 2022, based on 1,502 employer responses since mid-June.

Employers are not expected to increase employees' share of the cost of coverage in 2022, Mercer said. On average, employees will pick up 22 percent of total health plan premium costs, unchanged from 2021.

"Employers understand that health care affordability is a real issue for many employees, especially for lower-wage workers," said Tracy Watts, Mercer's national leader for health care policy. "They are looking at a range of strategies that will keep more money in employees' paychecks and remove cost barriers when care is needed."

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Health Benefit per Employee Cost, Inflation and Workers' Earning

Mercer compared its survey findings with compensation and consumer price index (CPI) data from the U.S. Bureau of Labor Statistics.

† projected 2022 health cost.
Mercer's National Survey of Employer-Sponsored Health Plans 2021.

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Cost-Saving Measures

According to Julie Stone, managing director of health and benefits at Willis Towers Watson, "rising costs and increased utilization, fueled by a resurgence in deferred care, are driving employers to find new ways to control costs while providing employees with affordable, high-quality care."

Employers responding to the Willis Towers Watson survey identified measures they are taking to address affordability in the following areas:

• Telebehavioral health. A majority of employers (89 percent) are offering coverage for telebehavioral mental health services, such as counseling for alcohol or drug abuse, and 7 percent are planning to offer them or are considering doing so.
  

• Onsite health promotions. More than half of employers (55 percent) offer onsite/worksite health- and wellness-promoting activities, and 17 percent are planning to offer them or are considering doing so.
  

• Specialty drugs. Over half of employers (54 percent) evaluate specialty drug costs and health outcomes through their medical plan, and another 29 percent are planning to evaluate them or are considering doing so.
  

• Centers of excellence. Nearly half of employers (48 percent) use centers of excellence within their health plans, such as by paying a higher share of costs for coverage received at hospitals or clinics rated as offering high-quality, cost-effective care, often because they specialize in procedures such as joint replacement or conditions such as cancer treatment. Another 23 percent are planning to add centers of excellence to their health plans or are considering doing so.
  

• Concierge services. About one-third of employers (31 percent) offer access to concierge services with integrated care management programs; 25 percent of employers are planning to offer them or are considering doing so.
  

• Narrow networks. Nearly one-third of employers (30 percent) are planning to offer or are considering limiting their in-network doctors and hospitals to higher-quality and/or lower-cost health care providers. Currently, 2 in 10 survey respondents (21 percent) offer narrow networks.
  

• Working-spouse surcharges. One-quarter of employers (25 percent) use spousal surcharges when additional employer coverage is available for the working spouse. Another 9 percent are planning to impose such surcharges in the next two years or are considering doing so during that time.
  

• Premium contributions based on pay and grade. Nearly one-quarter of employers (22 percent) currently structure employee contributions based on pay levels or job grades. Another 8 percent are planning to do this in the next two years or are considering doing so in that time frame.
  

• Medication adherence. Only 13 percent of employers provide support services to help ensure that employees take their medications as prescribed, which can help improve health outcomes especially in more vulnerable populations. However, nearly 30 percent of employers are planning or considering offering these services.

Rising Claims Costs

HR consultancy Segal recently released results from its 2022 Health Plan Cost Trend Survey of almost 80 health insurance carriers, managed care organizations, pharmacy benefit managers and third-party administrators.

The survey focused on the health plan cost trend, which shows increases in per-capita claims costs, encompassing eligible billed charges from health care providers before participant cost-sharing. Claims cost, minus employee cost-sharing, are paid directly by self-insured employers. For fully insured employers, rising claims costs are reflected in future premium increases.

According to Segal, the health plan cost trend has increased between 5 percent and 7 percent each year for the past 10 years, but in 2020 open-access preferred provider organizations (PPOs) and point-of-service (POS) plans reported that the actual cost trend dropped 2.1 percent, "driven by a significant drop in claim activity," said Edward Kaplan, senior vice president and national health practice leader at Segal. "We can expect that 2022 will return to pre-pandemic cost trend levels," he added.

Respondents to Segal's survey project that:

• The per-person cost trend will increase to 7.3 percent for open-access PPOs/POS plans.
  

• For outpatient prescription drugs, the projected annual cost trend will be 8.4 percent, mostly driven by price increases and new specialty drugs.

Segal also found that the pandemic substantially increased the use of virtual-care visits and urgent-care facilities, which reduced emergency room (ER) visits, resulting in cost savings. The average cost of an ER visit can be close to $1,900, while a visit to an urgent-care facility is closer to $165.

"We expect ER visits will continue to be down compared to previous years, as people have made a shift to using urgent-care centers, and that will continue to save health plans money," said Eileen Flick, senior vice president and director of health technical services at Segal. "There will also be a higher use of telehealth services: It is here to stay."

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Aon Projects a 5% Increase in Employer's Medical Costs

Consultancy Aon also released its health plan cost forecast in October. Costs for large, self-funded U.S. employers will increase on average 5 percent to more than $13,000 per employee in 2022, Aon projects. Budgeted health care costs increased to an average of $12,792 per employee in 2021, an increase of 5.2 percent from 2020.

Aon's forecast is based on health care costs and benefit designs of more than 700 large U.S. employers representing 5.6 million employees. The projections were developed after taking plan design changes and vendor negotiations into account.

Medical cost trends for health care claims "are likely to increase at a moderate rate, though COVID-19's impact adds some uncertainty for plan sponsors," the firm noted. Underlying 2022 cost trends in the U.S. are projected to increase around 6.5 percent, based on Aon's 2022 Global Medical Trend Rates Report, although many companies "will successfully manage these costs down using strategies like plan design changes, vendor oversight and chronic condition management," the firm noted.

Comparing 2021 health care costs with 2020, Aon reported the following:

Employees in 2021 are contributing about $4,505 per enrollee for health care coverage this year, of which $2,482 is paid in through premiums deducted from employees' pay and $2,023 is paid through deductibles, co-pays and co-insurance.