Employers Prioritizing Enhanced Benefits in New Year, Not Cost-Cutting

Jan 17, 2023

Despite group health insurance costs expected to rise 5.4% this year, the tight labor market is forcing employers to prioritize enhancing benefits over cost-cutting measures, according to a new report by Mercer.

With Americans increasingly struggling to pay their health care bills, more employers are shying away from only offering their workers high-deductible health plans (HDHPs) that reduce premiums up front for higher out-of-pocket costs for workers.

Also, with mental health a top concern for workers, employers are seeking out benefits and plans that include virtual mental health services to make it easier to access care.

The expected health insurance cost growth of 5.4% is still less than general inflation, which was averaging just a tad below 8% in 2022. Because of high inflation, employers should be prepared for continued accelerated cost growth in 2024 and beyond, according to Mercer.

What employers are doing

With the tight labor market and health insurance benefits high on employees’ demands, employers are focusing on:

  • Enhancing benefits to improve attraction and retention (84% of large employers cited this as “important” or “very important”).
  • Adding programs/services to expand access to behavioral health care and mental health services (73% said this was important or very important).
  • Improving health care affordability (68%).
  • Enhancing benefits/resources to support women’s reproductive health (55%).

That’s not to say that employers are not concerned about costs. Instead, they are tackling it in different ways than in the past.

“Given the focus on affordability, it is not surprising that, despite expectations of higher healthcare costs, most leaders are avoiding ‘healthcare cost shifting,’ or giving plan members more responsibility for the cost of health services through higher deductibles or copays,” Mercer wrote.

It added that there was little change in the median amount of these cost-sharing features in 2022.

Prior to the COVID-19 pandemic, employers were shifting workers to HDHPs to reduce their costs, but while employees enjoy lower premiums with these plans, if they need care they will pay more out of pocket.

Mercer found that fewer large employers are offering only HDHPs than in past years. Very large organizations (20,000 or more employees) had been adopting these plans with gusto until 2018, when 22% of them offered an HDHP as the only option for their employees. That fell to 13% in 2021 and was only 9% in 2022.

Instead, more employers were using salary-based premiums in 2022 (34%, up from 29% in 2021). Under these arrangements, lower-wage workers have smaller paycheck deductions for health coverage than those with higher salaries.


Employers are instead looking at other ways to cut costs for themselves and their employees. The Mercer study found that:

  • 35% of large employers are steering employees to high-performing provider networks and other sources of high-value care.
  • 36% of large employers offer telephonic navigation and advocacy service to help members find the right provider based on quality and cost.
  • 17 % offer digital navigation.
  • 24% are focusing on managing costs of specialty drugs.
  • 23% are working with their carriers and pharmacy benefits managers on cost and clinical management strategies.