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

Employers are expected to pay a lot more for employee health insurance in 2023. A study by professional services firm Aon, estimates a 6.5% increase resulting in 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 9.1% overall inflation rate. During the pandemic, many employee were postponing or skipping care, resulting in lower claim rates. Now that medical claims are increasing to more normal levels, inflationary costs are taking effect.

"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 statement. "Despite this historic occurrence, employer health costs are expected to increase 6.5% in 2023 due to economic inflation pressures."

Other contributing factors adding pressure on health care trends are new technologies, severity of catastrophic claims, blockbuster drugs, and increasing share of specialty drugs.

In terms of 2022 health plans, employer costs increased 3.7 percent, while employee premiums from pay checks were slated to be a more modest 0.6 percent increase from 2021, according to the firm's analysis. Plan costs represent the employer's and employee's combined premiums for medical and prescription drug costs but exclude employee out-of-pocket payments such as deductibles, co-pays, and co-insurance. On average, employers subsidize about 81% of the plan cost, while employees pay the remainder.

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