The average per-employee cost of employer-sponsored health insurance rose by 5.2% this year to reach $15,797 because of inflation and higher spending on prescription drugs, according to Mercer’s National Survey of Employer-Sponsored Health Plans report. Cost increases have averaged 3% annually since 2012; employers expect higher increases to continue in 2024 at a projected rate of 5.2%.

Cost increases were highest for employers with 50-499 employees, averaging 7.8%, the report found. They also reported a higher average per-employee cost for health insurance of $16,464 compared to $15,640 among larger employers with 500 or more employees.

“Inflation-driven cost increases are phasing in as contracts are renewed,” Sunit Patel, chief health actuary at Mercer, said in a press statement. “It may take another couple of years for price increases stemming from higher healthcare sector wages and medical supply costs to be felt across all health plans.”

Mercer noted that costs rose by 3.2% last year, well below general inflation, which averaged 8%. However, because healthcare providers typically have multi-year contracts with health plans, employers did not feel the full brunt of inflation last year. At the same time, inflation is only one factor behind this year’s higher cost increases. In 2023, spending on prescription drugs rose sharply.

“While the effects of inflation may be relatively short-lived, new and ongoing developments in the pharmaceutical market seem likely to have a longer-term impact on health benefit cost,” Patel said.

For the report, Mercer surveyed 1,917 public and private employers representing approximately 134,000 employer health plan sponsors with 50 or more employees across the US.