Projections Indicate Modest Healthcare Cost Increase in 2021

The past seven months have been rocky for employer-sponsored health insurance. Between COVID-19 completely upending budgets and many small businesses considering cutting coverage, a lot of uncertainty remains in the market. However, a recent Mercer survey indicates only modest cost increases for 2021. What should employers expect in the coming year?

What’s the Story?

Human resources consulting firm Mercer recently released findings from its annual National Survey of Employer-Sponsored Health Plans report. Despite COVID-19 and plenty of uncertainty, one of the key takeaways from the survey is that employers are projecting a “fairly normal increase of 4.4%” on average for health benefit expenditures. 

The findings are based on 1,113 surveys conducted through the end of August 2020. Mercer’s Director of Health Research Beth Umland points out that these results make assumptions about coronavirus-related cost projections, which could vary in the new year. This includes a new vaccine and possibly more testing. 

The other main takeaway? The divide between healthcare costs and Consumer Price Index (CPI) and wage growth is wider than it’s been in years. In other words, inflation and employee earnings haven’t kept up with healthcare price increases.

What Else Should Employers Know About the Findings?

These preliminary findings may be adjusted as the end of the year nears and more employers submit survey responses. However, among the current respondents, more than half indicated that they had no plans to reduce the costs in their medical plans for 2021, and only 18% planned to shift healthcare expenses to employees through increased deductibles and copays. 

Not only that, but many employers plan to add additional resources to help their workers during the pandemic. The six most popular new benefits include: 

1. Telehealth services 
2. Voluntary benefits
3. Behavioral healthcare
4. Targeted health solutions
5. Support for complex cases
6. Limitations on surprise/balance billing

Plan Ahead for Open Enrollment

Looking ahead to 2021, a few key trends stand out that can and should influence a company’s 2021 benefits package. Consider including six popular benefits in your offering, as well as preparing a step-by-step timeline for open enrollment.

Additionally, as the period approaches, consider reviewing your brokerage options. HR may find a new broker that can better manage their organization's benefits portfolio. If so, consider asking the following 10 questions to any prospective brokers who want their organization’s business.