2024 Health Care Trend Report
It’s no surprise that benefit plan premiums are getting more expensive. As
an employer, you’ve likely gotten used to this trend (fact: we’ve seen plan
premiums increase each of the 21 years that this report has been in
production), but it’s still hard to accept when you think about how it affects
your bottom line.
In the same breath, we cannot emphasize enough that your benefits
program is a deciding factor for talent when they’re choosing whether
to join your team.
Knowing where you stand in the marketplace is vital to understanding what your
prospective employees and current employees are comparing you against.
To delve deeper into this year’s findings, we invite you to join our live webinar on August 15th. The 30-minute session will feature two members of our data and underwriting team, who will share key trends and offer context to help employers make informed decisions about their employee benefits programs.
For more details and to register, click the link here.
The 2024 Health Care Trend Report shares the trends we are seeing across M3’s
book of business, which encompasses employers ranging in size from three to
more than 10,000 employees in a variety of major industry sectors. We’ve categorized the data based on geography, employer size, private vs. public sector, and plan structure.
There’s something to discover for everyone—eye-opening insights that may
just change how you approach your benefits going into your next renewal. As
your advisors, your M3 team is eager to dissect what these trends mean for
your organization and provide recommendations for creating the most effective
benefits program within the current environment. Let’s get into it.
M3 clients have access to even more detailed data trends
and benchmarking through our BenchmarkPRO platform.
Reach out to your M3 team to request your custom benchmark report today.
In 2024, health benefit plan premiums grew at an overall rate of 8.0 percent. This is higher than the historical norm of 6.6 percent since the report began in 2004 and is the highest rate of change since 2007 (8.4 percent). It is also almost an entire point higher than 2023’s rate of change.
To further underscore the trend, the overall annual average cost per employee
increased to $16,011 in 2024, a jump from $15,290 in 2023.
Why the increase? While it’s difficult to pinpoint the exact cause of rising costs, there are a few factors employers should note. The inflation we’re all feeling—from skyrocketing grocery bills to increased living costs—is driving up premiums, too. Add the influx of high-priced specialty drugs to the mix, and it’s no wonder this report shows a trend of rising premiums.
Employer Group Size
This year’s data showed most employers following the larger trend when
broken out by size based on employee count. Most categories experienced an
increase of around 1 percent, similar to the overall rate of change we reported
on in the Overview.
2024 Health Care Trends by Region
Geography plays a critical role in the benefits marketplace. Each region represented in this report faces unique opportunities and challenges that impact their benefit costs, including network availability, supply and demand for top talent, and carrier competition. These factors influence not only the care that is available to local employees, but also the associated costs and
individual employers’ desire for innovation.
With a balance of managed care and fee-for-service options, employers in Northcentral Wisconsin have choices for HMO, POS, and PPO plans. However, our team notes a trend in provider consolidation within this region that may contribute to fewer insurance options for employers.
In 2024, the average increase came in at 5.1 percent, nearly the same level of increase as 2023 (5 percent). However, the average cost per employee in this market increased more notably, rising to $18,466 in 2024 from $18,041 in 2023.
Northeast Wisconsin, spanning the Fox Valley and Lakeshore regions and north to the Upper Peninsula of Michigan is a strong fee-for-service market. Most plans leverage either PPO or POS plan types, although provider networks continue to drive innovation to help control costs with focused network options. The fee-for-service structure makes this market stronger for employers who choose to self-fund.
This market experienced an overall increase of 9.1
percent, which is up from 8.1 percent in 2023. The average cost of $15,595 was up from $14,819 the previous year.
Including Milwaukee, Fond du Lac and Kenosha, this market is notably the most predominantly self-funded market in the state, though we are starting to see a shift to high performance/narrow network approaches that we have not seen historically.
This year, the average increase came in at 7.4 percent, down from 7.9 percent in 2023. The average cost per employee was $15,489, which is an increase from $15,083 the prior year.
Centered in Madison, this market largely utilizes HMO providers, making self-funded plan less prevalent than in other markets.
In 2024, the market experienced an overall increase of 8.4 percent, which is a jump up from a 7 percent change rate in 2023. The average cost of $15,887 represents an increase from $14,879 the previous year.
Western Wisconsin’s benefits market is influenced both by Wisconsin-based providers and those of the Twin Cities metropolitan area right across the border. Over the past year, this region has seen multiple providers merge, and some close altogether, which has affected
the access this region has to health care services.
In 2024, this market experienced an average increase of 9.2 percent, up from 7.1 percent in 2023. The average cost of $18,048 also represents a meaningful increase from $17,754 in 2023.
The Northcentral Illinois benefits market is largely made up of fee-for-service health plans. The majority of employers in this market are fully insured, but there is a rising interest in pursuing alternative funding strategies, along with unique network solutions and direct contract offerings for employers. In 2024, the market experienced an overall 7.2 percent increase versus 6.7 percent in 2023. The average cost per employee in the market is the lowest in the M3 footprint at $13,776 per employee.
Private vs. Public Sector
For the fifth year in a row, the public sector rate of change grew more slowly
than that of the private sector. M3 public sector clients experienced an overall
cost increase of 6.2 percent compared to 8.3 percent in the private sector.
- The average private sector annual cost per employee increased to $14,715 in 2024, up from $14,021 in 2023.
- The 2024 public sector annual cost per employee rose to $20,779 from $20,048 in 2023.
Employers in both sectors appear to be managing the influences of deferred
care during the pandemic, an element of increased medical claims. This is
coupled with employers appearing to be very resistant to changing much
of their cost sharing mechanisms in ways that would expand employee-cost
sharing. This is likely a reaction to the highly competitive labor market.
For purposes of this report, a “high deductible plan” is defined as being equal to or greater than the current Internal Revenue Service deductible requirement ($1,600) but should not be confused with the statutorily defined “High Deductible Health Plan (HDHP)”; which is subject to numerous other regulatory parameters and is typically used in conjunction with a Health Savings Account (HSA).
Over the past year, we continued to see a growing number of employers offer
high deductible plans. The percentage of M3 clients who choose to offer a high deductible plan rose from 71.6 to 73.2 percent.
This trend continues to gain traction, appearing to be driven by further
adoption of consumer driven plans, economic inflation affecting the medical
system, and employers deciding to offer high deductible options to ensure
compliance with Affordable Care Act affordability requirements.
Tax Advantaged Savings Plans
The growth of employers offering health benefit plans which meet the IRS
deductible requirement to qualify for HDHP status coincides with an increase in offering tax advantaged savings plans for employees.
- Employers offering an HSA provided an average contribution to an employee health savings account of $912 in 2024. Private sector employers contributed an average of $769, whereas the average public sector employer offered $1,264. Those dollars are controlled by the employee once they are deposited to the HSA account.
- Employers who chose to contribute to an HRA contributed an average of $2,130 per employee. Public sector employers contributed an average of $1,703, while private sector employers contributed $2,366 on average. Those dollars can be used by employees for medical costs, but all unused funds are returned to the employer at the end of the year.
Plan Design
Employers are still using plan design strategies to drive specific consumer
behavior and manage health care costs. In our 2024 report, we see employers
using employee cost-sharing mechanisms across plans and strategies that
encourage plan members to prioritize and utilize primary care relationships
and cut down on emergency room visits.
This year’s highlights include:
- Deductibles continued to increase slightly, while maximum out-of-pocket expenses followed suit and increased according to their typical trend.
- Interestingly, public sector PPO out-of-pocket expenses decreased to $3,675 in 2024 from $3,795 in 2023. This was the only plan design tracked for this report that showed a decrease in maximum out-of-pocket expense.
- HMO plans saw an overall increase 1.5% higher than PPO plans, but overall costs per employee remained lower.
- Public sector HMO plans specifically had an interesting data point: the average deductible for this plan type increased roughly $150, but the maximum out-of-pocket costs only increased $53.
- In comparison to other plan design trends, we wouldn’t describe the increase in co-payments for emergency room visits as a rise so much as a jump. Most significantly, private sector PPO plans ER visit co-payments rose from $294 in 2023 to $314 in 2024. This is a pattern for this plan design type, as these co-payments have risen, on average, $23.50 per year since 2018.
- Private and public sector co-payments for low-cost services such as office visits remained largely stable, whereas those for high-cost services such as emergency visits continued to increase.
Employee Contributions to Premiums
Health benefit plan premium costs are typically shared between an employee
and their employer. In this section of our report, we break down how employers in the private and public sectors are adjusting their employee contribution structure to find a balance between managing rising premiums and maintaining a desirable benefits program to attract and retain talent.
Private sector employee contributions increased this year, reversing a trend that we had seen (from a percentage basis perspective) for the past few years.
- On a percentage basis, private sector employee contributions experienced a slight increase for the first time in four years, rising to 25.2 percent for single coverage and 32.4 percent for family coverage (the corresponding values in 2023 were 25 and 31.2 percent, respectively).
- On a dollar basis, this increase was also reflected with notable changes in monthly dollar premium contributions to $187 for single coverage and $721 for a family plan (compared to $177 and $667 in 2023, respectively).
After a decrease in 2023, 2024’s data shows that public sector employee
contributions are on the rise again. Public sector employee contributions
were as follows:
- On a percentage basis, public sector employee contributions increased to 13.1 percent for single coverage and 13.7 percent for family coverage (from 11.8 percent and 12.1 percent respectively).
- The amounts on a dollar basis also reflected an increase, as public sector monthly dollar premium contributions were $115 for single coverage and $292 for family plans (compared with $99 for single and $245 for family coverage in 2023).
