Healthcare costs for employers to rise 6.5% in 2023, Aon report predicts

Average costs for U.S. employers that pay for their employees’ healthcare will rise by 6.5% in 2023, global professional services firm Aon found Thursday. Costs per employee will be $13,800, up from $13,020 in 2022.

The report used information from Aon’s Health Value Initiative database, which includes healthcare costs and benefit designs for almost 700 U.S. employers. These organizations employ 5.6 million employees and represent $76 billion in 2022 healthcare spending.

The projected 6.5% increase in average costs for U.S. employers is more than double the 3% increase employers experienced in 2022, the report said. However, the increase is below the 9.1% increase in the Consumer Price Index, which was reported Thursday by the U.S. Bureau of Labor Statistics. 

Medical claims were lower in the beginning of the pandemic as many patients postponed care, creating a smaller budget in 2022. But now claims are slowly returning to normal levels for employers and inflation is rising, the report said.

“In complete contrast over the last decades, we are measuring that healthcare budgets for U.S. employers will come in nearly three times lower than the Consumer Price Index this calendar year,” Debbie Ashford, the North America chief actuary for health solutions at Aon, said in a news release. “Despite this historic occurrence, employer health costs are expected to increase 6.5% in 2023 due to economic inflation pressures.”

Inflation is usually slow to affect healthcare because of the multi-year nature of contracts between providers and payers, but it will likely become more prevalent in the coming year, Ashford added.

To combat an increase in costs, Aon recommends employers address the expense burden associated with patients with chronic and complex healthcare conditions. Ashford said “it is not uncommon” for 1% of membership to drive 40% of employers’ healthcare spending in any given year. Collecting data and analytics on these conditions may help plan sponsors mitigate costs. 

“The effect of chronic conditions has far-reaching implications beyond what we see with healthcare costs, out to the other areas of the business, like absence and productivity, disability and worker’s compensation,” said Farheen Dam, Aon’s North America health solutions leader. “By focusing on chronic conditions, not only are we improving the health and happiness of employees, but we’re helping to improve the way they live and work.”

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