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

Price increases driven by economic inflation typically are slow to appear in medical trends because of the multi-year nature of the typical provider contract but will become apparent over the coming year. Other contributing factors are new technologies, severity of catastrophic claims, blockbuster drugs and increasing share of specialty drugs.

"In what remains a tight labor market, employers are absorbing most of the health care cost increases," Ashford says. "Employers are budgeting higher due to uncertainty and the anticipation that inflationary pressures will increase the cost of health care services."

Employees in 2022 are contributing about $4,412 for health care coverage, of which $2,520 is paid in the form of premiums from paychecks and $1,892 is paid through plan design features such as deductibles, co-pays and co-insurance. Employer costs increased 3.7%, while employee premiums from paychecks were slated to be a more modest 0.6% increase from 2021, according to the firm's analysis. Plan costs represent the employer's and employee's combined premiums for medical and prescription drug costs but exclude employee out-of-pocket payments. On average, employers subsidize about 81% of the plan cost, while employees pay the remainder.

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Faced with the constant upward pressure from health care trends each year, employers are exploring new solutions to trim costs. One approach is to address the high costs associated with patients with chronic and complex health conditions.

"The effect of chronic conditions has far-reaching implications beyond what we see with health care costs, out to the other areas of the business, like absence and productivity, disability and worker's compensation," says 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."