Health insurance through your workplace could be much more expensive next year.
Costs for employer-sponsored health plans in 2024 are expected to jump over 6%, according to new data from consulting firms Mercer and Willis Towers Watson (abbreviated WTW). As the Wall Street Journal first reported, that would amount to the largest price increase for employer health plans in about a decade.
Mercer’s survey, released Thursday, found that health plan costs could jump by 6.6% next year, assuming employers made no cost-cutting changes to their current plans. And even if they do take steps to cut costs, the increase is expected to be 5.4% on average. Similarly, in preliminary survey results shared with Money, WTW found that health insurance costs are expected to rise between 6% and 6.4%.
According to Mercer, typical annual price increases have hovered between 3% and 4% for more than a decade, making next year's estimated hikes particularly steep.
Inflation is finally catching up to health insurance
As workers head into open enrollment season to sign up for 2024 health plans, they may be in for some sticker shock.
Perhaps surprisingly, private health insurance is one area where inflation has largely yet to reach. In fact, the latest inflation reading from the Labor Department shows health insurance costs in a notable period of deflation — meaning that prices are going down. For the year ending in July, overall health insurance costs fell nearly 30%, even as the cost of prescription drugs and other medical supplies jumped.
Why the disconnect? Experts say that hospitals and other health care providers have been dealing with elevated prices all along, but those price increases didn’t immediately seep through to health insurance because financial contracts are typically negotiated every few years.
Now, private insurance prices are finally catching up.
The outlook for 2024 health insurance prices
After seeing overall inflation rates often in the 7% to 9% range, a 6.5% price increase might not sound so bad. But health insurance plans are extremely expensive: On average, they cost about $14,600 per employee, according to the Journal. The projected increase could add almost $1,000 to that total.
The good news is that — in theory — you won’t have to foot the entire increase yourself. Employers typically split the cost of health insurance with their employees, with a portion of the cost deducted from each paycheck in the form of a premium.
Exactly how much of this overall increase in cost for health plans will come out of your pocket will depend on how your employer plans on dealing with the elevated prices. But if you're trying to read the tea leaves, it may help to know that employer size tends to play a major role in how much a company contributes to a worker’s health plan, according to the nonprofit Kaiser Family Foundation.
In 2022, KFF found that employers generally covered 83% of the cost of annual premiums for singles, leaving 17% to their workers. For family coverage, employers covered less — 72%. However, workers at companies with less than 200 employees typically had to spend more out of pocket. For family plans, as an example, small companies paid 64% of the premium.
Other factors such as industry, region and the type of health plan may also play a part in how much you’re ultimately on the hook for once the expected price increase kicks in next year.
More from Money:
Rates are subject to change. All information provided here is accurate as of the publish date.