How much should employers budget for employee health insurance for the coming year? It's a question that arises (and an amount that rises) each year as summer fades to fall. The increase for 2024 coverage may be trickier than ever to forecast, given the tumult in the health care business since 2020.

A recent estimate by the consulting firm Aon underscores the dilemma employers face. Several credible forecasts already released suggested planning for about a 7% hike in health care costs for next year. Aon believes it will be closer to 8.5%, and offers a compelling case for the jump.

The 2024 number will clearly be higher than the 4.5% average increase in plan costs this year. Forecasters are dealing with a set of unique factors:

• the winding down of care avoidance that occurred during the pandemic's peak;
• the expiration of two-year contracts with providers;
• the added expenses dumped on providers by the pandemic but not yet passed along;
• the emergence of new drugs to address obesity and diabetes; and
• the growing realization that plan members with chronic conditions are the real cost drivers.

Aon says these factors are going to land more heavily on sponsors than projected by other prognosticators. In view of its estimate, Aon argues that sponsors need to be much more proactive in examining how their members utilize (or fail to utilize) their benefits, and adjust benefits strategies accordingly.