Employers Grapple with Escalating Health Care Expenses in 2023

Sep 13, 2023

As the latter half of 2023 unfolds, employers face a formidable challenge in curbing the surge of health care costs while maintaining affordable benefits. The task is formidable due to the sharp escalation of health care expenses in recent years, with indications pointing toward a continuation of this trend. In 2022, costs escalated by 3.2%, and projections from a Mercer survey indicate an anticipated 5.4% increase for 2023. This predicament is compounded by the perception among employers that their repertoire of cost-containment strategies is increasingly limited.

The 2023 Broker Services Survey conducted by Zywave underscores employers’ mounting frustration in the face of dwindling options to counter their soaring health care expenses. Traditional methods, including steering employees towards cost-effective care, boosting health care literacy, and leveraging technology, appear to have yielded diminishing returns. Consequently, short of more drastic interventions like health plan redesigns or alternative funding approaches, viable avenues for mitigating mounting costs appear scarce. This challenge might intensify if an anticipated recession materializes in the latter part of the year, adding further complexity to the issue.

Survey responses also reveal that employers are grappling with uncertainty regarding the efficacy of their current plan designs in managing health care costs. This uncertainty stems from the perceived limitations of established cost-reduction mechanisms. Consequently, organizations may be compelled to undertake substantial changes to address rising expenses, despite the risks and uncertainties compounded by the ever-shifting U.S. economic landscape.

Amid these trials, many employers hesitate to scale back benefits due to a robust labor market and employee expectations. Although immediate relief from escalating health care costs seems unlikely, strategic planning and proactive measures offer a viable path to mitigate the impact of these financial challenges.

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