First, here's a look at Aon's process, based on data from 800 U.S. employers representing approximately 5.6 million employees, as well as follow-up interviews with providers, insurers and sponsors. 2023's 4.5% increase continued to reflect lower utilization by COVID-wary patients. That utilization continued to be suppressed by the barriers erected by the design of many plans that featured high deductibles, copays and coinsurance–all of which discouraged already financially strapped plan members from seeking the upstream preventative care that reduce medical bills over time.

Meantime, provider costs were rising. Finding and keeping medical staff was especially challenging as the pandemic wore on. The consolidation within the industry led to new pressure to generate revenue. And demand was growing for new drugs and procedures that were proving effective with chronic and high mortality diseases.

Related: IN-DEPTH: A 7% health plan hike in 2024: What's behind the numbers?

However, Aon says, the two-year contracts binding many providers to earlier fees for services were still in place this year. Then add an unexpectedly high inflation bubble to provider cost structure, Now, as those contracts expire, sponsors will face pass-along costs from insurers that will reflect two years of inflated costs.

"While economy-wide inflation spiked during the past two years, employer-sponsored health care costs did not see dramatic increases during the same time period due to the multi-year nature of typical medical provider contracts," said Debbie Ashford, the North America chief actuary for Health Solutions at Aon. "Even though inflation is subsiding, health care trend is growing as medical providers push insurers for larger cost increases to cover the higher costs of wages and supplies that they endured during the last couple years but were unable to pass on to payers."

Ashford said the combination of inflation plus expiring contracts were key to Aon's higher estimate. Increased utilization added another layer, although utilization "hasn't come rushing back as everyone thought it might. It's about at pre-pandemic levels." But prescription drug costs are rising faster than many expected.

"We're seeing that growth in specialty drugs, particularly for diabetes and weight loss. Largely because of the social media flood around them, we are seeing an uptake in those drugs–per member per month cost have potentially doubled in 2023 vs. 2022," and will go higher still in 2024.

Plan design strategies need to be more comprehensive so that areas that employers can exert control over are addressed. Among Aon's recommendations:

• Steering members to high quality, lower cost providers by providing guidance services or simplifying choices.
• Locking in contracts with reference-based pricing, which adds predictability to budgeting.
• Understanding utilization trends within the population to get a better handle on the impact of chronic conditions on overall cost.
• Providing integrated services designed to meet the needs of high-cost plan members.
• Adopting a value-based design that brings all these elements together in an overarching, long-term strategy.
• In cases where an employer's geographic location(s) may have shifted post-pandemic, an audit of local/regional services would be in order.

One strategy employers may want to consider carefully is whether this is the time to increase any type of cost-sharing with members.

"This is a really important time for employers to take a look at how employees use the plan, because we know that 20% of employees are spending 10% or more of their income on health care. Asking them to now absorb more is a challenge. It's already not affordable," said Janet Faircloth, senior vice president of Health Solutions for Aon.

Faircloth said rather than attempting to manage plan costs via cost-sharing, sponsors want to think longer term. "Examining plan designs and models that address this is critical, ones that lower the cost of primary care and encourage members to access those services. You want to make primary care affordable so the most expensive employees are getting the care they need when they need it. And that include mental health services as well."