US employers anticipate a 5.4% increase in total health benefit cost per employee for 2024, even after making adjustments to their plans to mitigate the growth in expenses. This projection emerged from preliminary findings from the National Survey of Employer-Sponsored Health Plans 2023, which took feedback from over 1,700 employers by August 14.

This forecasted growth of 5.4% – a marked increase from the typical annual cost surges of 3-4% over the past decade – indicates that the recent inflation surge and healthcare labor shortages have influenced healthcare costs, thereby driving up health benefit expenses.

**Factors Driving Costs**

Current economic uncertainties have applied upward pressure on health benefit expenses. Other influences include ongoing changes in the healthcare sector, such as healthcare systems merging and the rollout of high-priced gene and cellular treatments. This year, there's also a notable increase in the usage of expensive GLP-1 drugs for diabetes and obesity treatments.

Without implementing any modifications, employers predict that the cost of their primary medical plan would escalate by an average of 6.6%. The minor difference in the anticipated hikes before and after plan adjustments suggests that the majority of employers aren't slashing costs in their plans, indicating worries about the affordability of healthcare for employees.

Over the past half-decade, many larger companies have sidestepped the cost-management strategy of transferring expenses to employees, evident by the negligible growth in deductibles and other shared-cost requirements. Especially during the pandemic, some chose to shoulder the cost hikes rather than passing them onto employees, leading to a quicker rise in health plan expenses.

Smaller businesses reported a steeper average initial renewal rate of 7.5%. However, these hikes can differ drastically between companies, irrespective of their size. About a quarter of the respondents indicated that without any changes, their medical plan expenses would surge by 10% or more. On the other hand, a similar fraction anticipated a rise of 4% or less.

**Factors Moderating Cost Growth**

Considering the unprecedented inflation levels and continuous healthcare labor shortages from the previous year, it might be surprising that projected cost hikes aren't steeper. Several elements might be moderating this growth, such as initiatives targeting enhanced patient outcomes. As companies shift from transferring costs to employees, they're focusing on long-term cost-management strategies targeting primary cost drivers like complex treatments and chronic ailments.

A significant number of larger companies have directed members towards better-quality care, adding Centers of Excellence to their health plan networks. Historically catering to intricate surgeries, these centers now address broader healthcare needs like cancer treatments. To ensure members access top-notch providers promptly, companies are providing healthcare navigation services. A survey earlier this year revealed that 28% of large companies have implemented such a service.

Furthermore, "point solutions" have gained traction, offering specialized services to individuals with chronic ailments like diabetes. Such interventions not only lead to better outcomes for patients but also generate savings for the plan.

**Balancing Benefits and Costs**

Annually, the survey quizzes large companies about the importance of various benefit strategies in the upcoming 3-5 years. Last year, the top strategy was enhancing benefits to attract and retain talent. However, this year, as the labor market stabilizes and the focus shifts to escalating healthcare costs, monitoring and managing high-cost claimants has emerged as the top priority. This generally implies assisting those with complex conditions to receive the best possible care.

**Alternatives to health insurance for smaller employers, and employers who want to offer benefits to part-time employees or those who can't afford or don't qualify for the major medical option: