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Prior to the Pandemic, Medical Costs for Employers Projected to Increase Minimally in 2020

CHICAGO (Dec. 3, 2020) – Aon plc, a leading global professional services firm providing a broad range of risk, retirement and health solutions, reports that its large employer clients budgeted on a pre-pandemic basis an average of $12,091 per employee for health care costs this year, up 1.8% from 2019. The analysis uses the firm’s Health Value Initiative database, which captures information for more than 600 U.S. employers representing 5 million lives and $64 billion in annual costs.

Employer health plan costs were budgeted to increase at the lowest rate in more than a decade prior to the COVID-19 pandemic, which further suppressed medical claims for most employers. In a separate analysis, Aon surveyed the projected impact of COVID-19 from the carriers’ perspectives and found that the U.S. medical plan cost per employee for 2020 is projected to be 5 percent lower than initially expected due to COVID-19.

In terms of 2020 plan costs, employer costs were budgeted to increase modestly at 2.1%, while employee premiums from paycheck were slated to be nearly flat (+0.4%) from 2019. Plan costs represent the employer’s and employee’s combined premiums for medical and prescription drug costs but exclude employee out-of-pocket payments such as deductibles, copays and coinsurance. On average, employers subsidize about 80% of the plan cost, with employees paying the remainder.

Modest increase to U.S. medical plan costs on a pre-pandemic basis from 2019 to 2020

Plan Cost*



Change from 2019 to 2020

Employer Cost




Employee Premiums from Paycheck




Total Plan Cost




Employer strategies around dependent costs continue to impact coverage elections and are slowing health care spending increases. For instance, if an employer implements a spousal surcharge or decreases its subsidies for spouses and children or completes a dependent audit, this can deter employees from enrolling their dependents, which in turn helps mitigate employer and employee costs. For the clients participating in the study, the family size decreased by 1.4% in 2020, favorably impacting per employee average costs.

Other areas where employers have been particularly successful around holding plan costs include:

  • Usage of narrow or local networks, which offer steeper discounts on medical services
  • Implementation of prescription drug cost management programs (e.g., mandatory generics and closed formularies)
  • Improved prescription drug rebate pricing terms
  • Engagement of an external vendor who can administer enhanced care management (engaging and bringing appropriate care to a targeted population with a particular chronic condition) or act as a concierge (who can improve member health and lower the employer cost by steering members to quality, low-cost providers)

Slight decrease for employees in 2020

Employees are contributing about $4,426 for healthcare coverage this year, of which $2,444 is paid in the form of premiums from paycheck and $1,982 is paid through plan design features such as deductibles, copays, and coinsurance.

Based on the analysis, there was minimal change to the employee premiums from paycheck. Favorable projected plan cost increase may have resulted in minimal cost shift to plan participants through employee premiums. Slight decrease in number of covered dependents further mitigated increases in per employee average amounts.

Employees appear to be spending less in out-of-pocket costs. This may be driven by the modest plan design changes in recent years, where employers are bearing the brunt of medical trend instead of employees.

Employee Costs*



Change from 2019 to 2020

Employee premiums from paycheck




Employee out-of-pocket costs




Total Employee Costs





Projected 2021 Claims Experience and Plan Costs

Aon estimates that budgeted plan cost increases will continue to be favorable, at 3% to 4% from 2020 to 2021.  Medical trends are likely to increase at a moderate rate, though COVID-19’s impact adds some uncertainty for the plan sponsors: added costs for testing, treatment and vaccination as well as a shift of services from 2020 to 2021.  For instance, while underlying 2021 trends in the U.S. are projected to increase around 7% using a “do nothing” approach (based on Aon’s 2021 Global Medical Trend Rates Report), many of Aon’s clients have successfully managed these down using strategies like making plan design changes and incenting migration to lower cost plans.

Focusing on Chronic Condition Care Management and Cost Efficiency

Employers have invested in new solutions, engagement and care management programs with the goal of optimizing spend and improving care quality for impactable health conditions. These solutions work through a variety of approaches focused on member engagement, steerage to high quality networks and providers combined with personalized member navigation and condition-specific care coordination.

Once implemented, the employer must measure the effectiveness of these new solutions.  After all, how does an employer know if a new solution is effectively managing the complex members and high cost claimants?  Is a solution actually performing, or are we just observing fluctuations in plan costs due to broader market dynamics, where claims and trends have been historically low for many employers?

The answer to that lies with Aon’s Cost Efficiency Measurement (CEM). CEM is powered by machine learning technology and can rigorously match an employer’s own population to a national dataset with millions of members based on factors such as geography, demographics, and more than 25 different comorbidities.  This results in an objective, unbiased analysis of an employer’s plan performance as compared to similar plans in the market. Quantifiable insights based on actual data can help determine if the implemented solutions are delivering results above and beyond typical performance or if it’s time to shift the health plan investments elsewhere.

“In spite of COVID-19’s continued presence, employers must maintain their focus on keeping remaining health care costs in check while still finding effective ways to support employees,” said Will Sneden, U.S. Health Solutions practice leader for Aon. “As part of their strategy, employers are looking for ways to spend their health care dollars most effectively. This becomes especially important during a global pandemic and in an economic recession.  Data-driven insights will be vital in addressing these concerns.”

Aon’s health care data source

The historical information and projections shown above were developed using Aon’s Health Value Initiative database, which captures healthcare costs and benefit designs for more than 600 U.S. employers representing 5 million employees and $64 billion in 2020 healthcare spend.  Note that the projections above are developed after taking plan design changes and vendor negotiations into account.

* Based on the weighted average cost of clients participating in Aon’s analysis in both 2019 and 2020.

About Aon
Aon plc (NYSE:AON) Aon is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance. Aon has five specific global solution lines: Commercial Risk Solutions, Reinsurance Solutions, Retirement Solutions, Health Solutions and Data & Analytic Services.

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