Health Plan Costs on the Rise
In the latest episode of The Jim Stroud Podcast, host Jim Stroud delves into the increasing costs of employer-sponsored health plans, highlighting the significant impact these costs will have on employees' paychecks. According to early results from Mercer's National Survey of Employer Health Plans, employers expect a substantial rise in health coverage costs. Stroud notes, "Employers expect the cost of covering one employee to jump 8.2% in 2027," marking the largest increase since 2003. > Employers expect the cost of covering one employee to jump 8.2% in 2027.
The Financial Burden on Employers and Employees
Stroud explains that employers and employees will both bear the financial burden of this increase. He states, "Employers are not sitting still. 59% told Mercer they planned cost-cutting changes for 2027." > Employers are not sitting still. 59% told Mercer they planned cost-cutting changes for 2027. These changes may include higher deductibles and new plan designs. Additionally, about two-thirds of large employers anticipate raising the employee share of the premium, which could see paycheck deductions rise by more than 8.2%. > Mercer says many workers will see their paycheck deductions rise by more than 8.2%.
Key Drivers of Cost Increases
The episode identifies three primary drivers behind the jump in health plan costs. The first is the rising cost of GLP-1 drugs, such as Ozempic, used for weight loss and diabetes. The second is the Independent Dispute Resolution process, which has led to more disputes and larger awards than expected. Finally, the increasing use of AI in doctors' offices to submit claims at higher levels has contributed to the cost increase. Stroud emphasizes, "Follow the money end-to-end, and you get a tool that made one group of workers better at billing, paid for by every other worker's paycheck." > Follow the money end-to-end, and you get a tool that made one group of workers better at billing, paid for by every other worker's paycheck.
Preparing for the Changes
Stroud advises listeners on how to prepare for these changes, particularly during open enrollment. He suggests comparing different health plan options, such as PPOs and HSAs, and paying close attention to any variable copay plans offered by employers. "The survey is still taking answers, and Mercer publishes the full results later this fall," he adds, urging employees to stay informed about their health plan options. > The survey is still taking answers, and Mercer publishes the full results later this fall.
