Rising healthcare costs are primed to become the next big battle in President Joe Biden’s battle against inflation. It’s unlikely he’ll be able to declare victory in time for a 2024 reelection bid. Many Americans have been paying a lot more at the pump and the supermarket this year but have generally been spared from price hikes for their job-based health insurance and doctor visits.
But that may be about to change.
Most Americans can expect to see premiums and out-of-pocket costs increase in 2023 at a faster rate than in recent years due to inflation, experts say. They’ll learn just how much during their employers’ open enrollment period, which typically takes place this month and next.
About 155 million Americans have work-based health insurance, the largest source of coverage by far, according to the Kaiser Family Foundation.
Economists, business leaders, and health care industry experts are warning that the wage, revenue, and supply chain pressures that hammered the margins of hospitals and clinics during the pandemic are about to send health coverage and out-of-pocket medical bills through the roof.
While the cost of gas, food, and other essentials can be volatile and change quickly based on inflation and market conditions, health care operates differently. The premiums and out-of-pocket charges that consumers pay are typically set in advance and last a year. What’s more, contracts between insurers and medical providers are usually locked in for several years.
So why the increase? Many hospitals, doctors, and other providers are feeling the pricing pressure, too. Their costs for labor, particularly nurses and service staff, and supplies have increased sharply due to inflation and demand. They are also 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. To alleviate their increased demand and rising costs, providers are pushing insurers to hike their reimbursement rates when contracts are up for renewal.
How big of an increase can you expect to see? Employers are expected to see their average health care costs soar by 6.5% to more than $13,800 per employee next year, according to Aon’s recent survey of nearly 700 large employers. That’s more than double the 3% increase to health care budgets that companies experienced for 2022, but still well below the 8.2% spike in annual inflation, as measured by the September Consumer Price Index.
While White House officials say the president and Democratic leaders have already taken meaningful steps to address the problem — the Inflation Reduction Act Biden signed in August included Obamacare subsidies and prescription drug pricing rules that could be a salve to sticker shock — health care advocates say that won’t be enough to remedy a significant deterioration in the affordability and quality of health coverage.
With uncertainty regarding federal help, some 20% of companies added more funds into their health care plans without taking money away from employee pay or other benefits this year, and another 30% are planning or considering doing so in the next two years, according to a Willis Towers Watson survey of 455 mid-sized and large companies released last month.
Because contracts between providers and insurers will expire at different times, the pricing pressure will continue, and the next year will only be the start of an extended period of increased health care costs.
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About the Author: Taylor Genter
Taylor is the Marketing Manager at Extract with experience in data analytics, graphic design, and both digital and social media marketing. She earned her Bachelor of Business Administration degree in Marketing at the University of Wisconsin- Whitewater. Taylor enjoys analyzing people’s behaviors and attitudes to find out what motivates them, and then curating better ways to communicate with them.