Employers’ health benefits costs expected to grow, but most won’t take cost-saving measures

Despite the expected increase of employer’s health benefits costs in 2021, most companies do not plan on taking cost-savings measures, according to early results from Mercer’s National Survey of Employer-Sponsored Health Plans 2020.

The survey, which included over 1,000 employer responses since early July, estimates that the health benefits cost for employers will increase by 4.4% for 2021.

This increase follows the upward trend of annual change in health benefit costs since 2019, however, it is still outgrowing the Consumer Price Index and employee wage growth, which have fallen to nearly zero, according to Mercer. 

Mercer’s full survey results are expected to be released in November, the company said.


When developing their health plans, employers have to consider a variety of factors for the upcoming year according to Tracy Watts, a senior consultant at Mercer.

“Different assumptions about cost for COVID-related care, including a possible vaccine, and whether people will continue to avoid care or catch up on delayed care, are driving wide variations in cost projections for next year,” she said.

Even with increasing health plan costs, most (57%) employers say they have no plans to reduce costs in their medical plans for 2021. Just 18% said they would take cost-savings measures by shifting the responsibility to employees through strategies like raising deductibles or copays.

Furthermore, many employers are adding new benefits to support their workers in the upcoming year. More than a quarter of respondents plan to add or improve their digital health resources, 22% say they will include voluntary benefits and 20% are adding or improving behavioral health benefits. Additionally, Mercer found that 45% of respondents are implementing flexible schedules to allow for childcare.


The COVID-19 pandemic has had historic effects on employment in the U.S. In April, the unemployment rate reached 14.7%, the highest rate in the history of employment data being tracked, according to the Bureau of Labor Statistics.

Unemployment rates have begun to recover, with September’s rate coming in at 7.9%.

Financial analysts predict that the repercussions of widespread unemployment will have lasting implications, even for hospitals’ financial recovery. Millions of consumers lost their health coverage because of the pandemic and have yet to fully resume seeking healthcare, leading to negative impacts for hospitals.

The Affordable Care Act marketplace has also been forecasted to see increased activity as a result of the unemployment crisis. Predictions say national insurers are likely to reenter the marketplace due to the mass loss of employer-sponsored insurance because of the COVID-19 and the economic fallout.

The $2.2 trillion stimulus bill passed last week called the HEROES Act, 2.0, appears to subscribe to that prediction by allowing those who have lost jobs during the COVID-19 pandemic to be eligible for the maximum health insurance premium subsidy under the ACA, a $1,386 benefit.


“Many employers are avoiding health plan changes that impact employees this year, but they know managing cost must remain a priority,” Watts said. “Plan member stress and care avoidance in 2020 may result in higher utilization in 2021, and struggling health systems may seek to recoup lost revenue through higher prices. On the plus side, the momentum behind digital health innovation is driving towards greater efficiency, better health management and greater member satisfaction.”

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