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2021 Employer Health Benefits Survey – 2021 Costs Running In-Line to Higher

How far do benefit executives expect premiums to rise in 2022? Similar to trends in 2020/2021, on average, those surveyed expect employee premiums to increase 4.8% in 2022. The forecast increase in premiums reflects expectations of deferred care and incremental COVID costs to linger into 2022.

Over the past three years @A.J. Rice and team have observed the spread between premium growth and the projected net cost trend narrowing. This narrowing spread indicates employers are less willing to push costs on employees in the face of a tight labor market and COVID disruptions.

Notably, employers appear more concerned about the deteriorating health status of employees than about ongoing COVID costs in 2022. More than half of those surveyed expect COVID costs to affect cost trends in 2022. Even so, the majority of our respondents expect the relative expense impact of the pandemic to be "modest." In comparison, only a small segment expects a "significant" cost impact in 2022.

The cost of switching is one pressure keeping employers with their vendors. While a significant majority of those interviewed report that their Pharmacy Benefit Management ("PBM") contracts are up for renewal in 2022, less than a quarter of our respondents have issued or plan to issue an RFP for their PBM relationship in 2022.

For Managed Care Organizations ("MCOs"), the narrowing premium spread suggests leveraging operating expenses and adding complementary services could drive earnings growth and margin gains for the next two years. For example, given the importance of drug expense in the overall medical cost trend, the move by national MCOs to more closely control or integrate pharmacy benefit management services makes particular sense.