What to Expect in 2023: Benefits Forecast

As we enter 2023, the benefits landscape faces new pressures. Inflation, a tight labor market, and rising healthcare costs are converging. Here's what we're watching.

Cost Pressures Intensify

After years of moderate trend, healthcare costs are accelerating. We're seeing:

• Medical trend projections of 6-8%, up from 4-5% in recent years
• Pharmacy costs rising faster than medical, driven by specialty drugs
• Provider labor shortages pushing up reimbursement rates
• General inflation affecting all aspects of healthcare delivery

Employers who budgeted for low-single-digit increases may face difficult decisions.

The Talent Market Stays Tight

Despite economic uncertainty in some sectors, the competition for talent continues. Benefits remain a key differentiator:

• Employers are reluctant to cut benefits during talent shortages
• Enhanced mental health and flexibility offerings continue growing
• Family-forming benefits (fertility, parental leave) are increasingly common
• Voluntary benefits are expanding as low-cost ways to enhance packages

Self-Funding Interest Grows

More mid-size employers are exploring self-funded arrangements:

• Level-funding products provide a bridge for the risk-averse
• Stop-loss markets remain competitive
• Greater cost transparency appeals to employers frustrated with fully-insured opacity

We expect self-funded penetration to continue increasing in the 50-500 employee segment.

What to Watch

Key themes for 2023:

GLP-1 drugs: Ozempic and similar medications will force coverage decisions. The cost implications are significant.

Mental health evolution: From emergency response to strategic investment. Employers are building sustainable mental health programs.

Flexibility permanence: Remote work and flexible arrangements are settling into permanent policies.

Stop-loss benchmarking: As more employers self-fund, demand for stop-loss data is growing. We're launching stop-loss benchmarking this year to meet that need.

2023 will be a year of difficult choices. Good data will be essential for navigating them.