Large U.S. Employers Expect a 5% Increase in Health Benefit Costs in 2021

A new Business Group on Health study asked U.S. employers about their approach to employee healthcare and benefits plans and how the COVID-19 pandemic has affected them.

The Business Group on Health 2021 Large Employers' Health Care Strategy and Plan Design Survey found that employers expect a 5.3% increase in the total cost of health benefits in 2021, and project the average cost of healthcare to reach $15,500 per employee in 2021.

The survey includes responses from 122 large employers from the manufacturing, hospitality, banking, technology, insurance, pharmaceutical, healthcare provider, and other industries, with 77% having more than 10,000 employees.

The Business Group on Health is a nonprofit organization based in Washington, D.C., that represents large employers' perspective on health policy issues.

C-suite perspective

“Health care costs are a moving target and one that employers continue to keep a close eye on,” said President and CEO of Business Group on Health Ellen Kelsay in a press release. “The pandemic has triggered delays in both preventive and elective care, which could mean the projected trend for this year may turn out to be too high. If care returns to normal levels in 2021, the projected trend for next year may prove to be too low. It’s difficult to know where cost increases will land.”

Healthcare highlights from the survey include:

• The large employers predicted that total expenses for the cost of healthcare for both the employees and the employers this year would reach $14,769, an increase of $197 from 2019. (Employers would spend $10,202 for the premium and health accounts with the employees contributing $4,567.) The cost is expected to rise to just over $15,500 in 2021.
• 64% of the surveyed employers say that the impact of COVID-19 on their healthcare strategy has been very significant (2%), significant (25%) or somewhat significant (37%).
• 45% say that their healthcare strategy "is an integral part" of their workforce strategy compared to 36% in 2019.
• 80% of the surveyed employers believe virtual care will have a "significant impact" on future healthcare delivery; 53% of employers plan to implement more virtual care solutions in 2021.
• There is an overall increase in the surveyed employers' mental health offering projections from 2019 to 2021, including increased use of online resources, manager trainings, anti-stigma campaigns, flexible work schedules, and employee training.
• 57% of large employers say that the government should solve surprise billing by setting a benchmark rate based on the local negotiated in-network rate; 54% say that the benchmark should be based on the Medicare rate (or some percentage of it).
• 51% say that they will have implemented at least one advanced primary care strategy (e.g., patient-centered medical home, direct contract care models) in 2021, compared to 46% this year.

Editor’s note: This article was updated August 19, 2020.