Hold onto your wallets! Health care could cost 8.5 percent more in 2024
While the inflation rate was 3.7 percent for the 12 months that ended in August, experts are warning that the increase in health care costs in 2024 could be more than double that.
A report released in August by global professional services firm Aon projected the average cost for U.S. employers that pay for their employees’ health care could increase 8.5 percent to more than $15,000 per employee in 2024.
That projected increase would be nearly double the 4.5 percent hike in health care budgets that employers experienced from 2022 to 2023. On average, Aon estimated that the budgeted health care plan cost for employers this year is $13,906 per employee.
Aon analyzed health care costs for more than 800 U.S. employers representing 5.6 million employees.
Another report, this one by the International Foundation of Employee Benefit Plans (IFEBP), found that U.S. corporate employers project a median health care cost increase of 7 percent for 2024. The nonpartisan group with more than 31,000 members surveyed 171 employers for its results.
Why are health care costs going up?
While everything seems more expensive lately, the hike in health care costs stands out. The reasons for higher health care costs next year include:
- Rising prescription drug costs,
- Increasing numbers of catastrophic health claims, and
- Surging chronic health conditions.
How much are employees currently contributing?
According to Aon’s analysis, employees in 2023 are contributing about $4,675 a year for health care coverage. From that number, about $2,682 is paid in the form of insurance premiums which get deducted from employee wages/salaries. The remaining amount, about $1,993, is paid through plan design features such as deductibles, co-pays, and co-insurance.
On average, the Aon report said, employers fund about 81 percent of the plan cost, while employees pay the remainder.
Tips for reducing health care costs
Given that the job market remains tight in most industries, employers will not likely want to risk losing employees by making their health care benefits less generous. Therefore, employers will try to absorb as much of the health care cost increases as possible and control expenses where they can.
Here are changes employers may implement to control health care costs:
- Shift to plans with higher deductibles and health savings accounts (HSAs).
- Educate employees about health care.
- Encourage employees to use telehealth whenever possible.
- Improve employee wellness initiatives.
- Prioritize work/life balance for workers.
- Increase employee co-pays.
Employers must weigh all factors before implementing these measures. For example, would employees prefer paying more per visit (higher co-pay) versus increased health care premiums (higher amount subtracted from their paychecks)? To answer that question (or others like it), employers must evaluate their workforce and determine the impact changes would have on attracting and retaining employees.
Key to remember: Employers that provide health care coverage as a benefit for employees will face significantly higher costs in 2024. To avoid passing these increases on to workers, employers will have to make tough choices about their benefit offerings.
