Although Americans are paying a lot more at the pump and at the supermarket this year, they have largely been spared the price spikes for their health insurance and doctor visits.
But that’s about to change.
Most workers can expect premiums and out-of-pocket costs to increase at a faster rate in 2023 than in recent years due to inflation, experts say. They will find out exactly how much during their employers’ open enrollment period, which usually takes place this month and next.
“It’s going to be harder than ever for employees to be able to afford some of the basics of health care — and these are people who have insurance,” said David Guilmet, chief executive of health solutions at Aon, a professional services firm.
About 155 million Americans have job-based health insurance, the largest source of coverage by far, according to the Kaiser Family Foundation.
Companies are trying to minimize cost increases as they seek to hire and retain workers in a tight labor market, experts say. That could force some businesses to subsidize even more of their health plans — employers cover an average of about 81 percent of workers’ premiums — or find other ways to reduce their overall health care costs.
While the cost of gas, food and other essentials can change quickly based on inflation and market conditions, healthcare works differently. The premiums and out-of-pocket fees that consumers pay are usually set in advance and last for one year. Moreover, contracts between insurers and medical service providers are usually locked in for several years.
In fact, health care costs are bucking their own typical trend. They almost always grow faster than general inflation, but that wasn’t the case this year.
Still, hospitals, doctors and other providers are feeling the price pressure. Their labor costs, especially for nurses and support staff, and supplies have skyrocketed due to inflation and demand. And they are seeing more patients this year after many people avoided going to the doctor and getting medical tests in 2020 and 2021 because of Covid-19.
Because of this delay in care, patients are often sicker when they come in, said Dr. Jeff Levin-Shertz, head of population health at Willis Towers Watson, a consulting firm. Treatment for people with more advanced cancer, cardiovascular problems and other diseases is more intensive and expensive.
To address these and other factors, providers are pushing insurers to increase their reimbursement rates when contracts are up for renewal.
Employers are expected to see their average health care costs jump 6.5% to more than $13,800 per employee next year, according to a recent Aon survey of nearly 700 large employers.
That’s more than double the 3 percent increase in health care budgets companies had for 2022, but still well below the 8.2 percent jump in annual inflation as measured by September’s consumer price index.
Workers are projected to spend an average of 2.6 percent more on health care this year than in 2021, Aon estimates. This was due to a 0.6% increase in monthly premiums and a jump of 5.2%. in out-of-pocket costs, on average.
Aon has not yet determined how much more employees will be paid next year, but the increase is expected to be larger than that in 2022.
However, employees may be spared the full impact of inflation. After years of increasing deductibles, copayments and coinsurance levels, many employers are now reluctant to make it even more expensive for their workers to actually seek care, experts said. So companies are making changes to their health insurance plans to minimize increases.
“There’s a real crisis in affordability,” Levin-Scherz said. Employers “don’t want to offer meaningless health insurance plans to people.”
About 20 percent of companies have added more funds to their health plans without taking money out of employee wages or other benefits this year, and another 30 percent plan or are considering doing so in the next two years, according to a survey by Willis Towers Watson of 455 medium and large companies published last month.
But workers are still feeling the impact. About 14 percent of employers passed the cost on to workers through out-of-pocket costs this year, while 24 percent did so through premium contributions, the survey found.
A growing number of employers are also seeking to protect workers who earn less. More than a quarter of the companies surveyed said that low-wage or low-wage employees are receive lower premiums than other employees in 2022, and another 13% plan or consider implementing similar measures in the next two years, the survey found.
Several larger employers are seeking to reduce core costs in the health care system, said Elizabeth Mitchell, CEO of the Purchaser Business Group on Health, which represents nearly 40 private companies and public organizations that buy health insurance for more than 21 million Americans. .
They are expanding workers’ access to telehealth and primary care to try to limit price increases. Some challenge hospital fees that are more transparent than in the past and identify higher quality providers for their employees.
“What our members are trying to do is actually get involved in the delivery system, more than maybe they have done in the past,” Mitchell said.
Next year will be just the beginning of a long period of increased health care costs, experts said.
As contracts between providers and insurers will expire at different times, price pressures will continue. This is likely to lead to even steeper jumps: Some 71% of employers surveyed by Willis Towers Watson said they expect a “moderate to significant increase” in their spending over the next three years.
“Now that we’re in a period of higher inflation, that’s going to work its way into those contracts,” said Debbie Ashford, chief actuary for North America for healthcare solutions at Aon. “For 2023, 6.5% [increase] is kind of muted.”