How Healthcare Is Finally Succumbing To Inflation
Healthcare prices are set to rise more than 6.5% in the short term with inflation driving the increases.
Americans have been paying a lot more for groceries and gas this year, but their wallets have largely been spared from medical price hikes. Unfortunately, that’s about to change. The cost of healthcare is surging after experiencing a lull during the pandemic when people avoided hospitals, while doctors and nurses focused mostly on coronavirus patients. Now, the cost is adding to the high inflation that’s already burning up the U.S economy.
According to CNN Business, most workers can expect to see their healthcare premiums and out-of-pocket costs increase at a faster rate in 2023 due to inflation. But they will only know by how much during their employers’ open enrollment period, which typically takes place in October and November. Approximately 155 million Americans have work-based health insurance, the largest source of coverage by far, the Kaiser Family Foundation says.
But companies are trying to minimize the healthcare cost increases as they strive to hire and retain workers in the strained job market. This could force some businesses to subsidize more of their health plans or find other ways to reduce their overall spending on medical care. On average, companies cover about 81% of workers’ premiums. Additionally, rising medical expenses could make it harder for the Federal Reserve to slow inflation since these costs are harder to reverse.
“It’s going to be harder than ever for employees to afford the basics of healthcare. And those are people who have insurance,” David Guilmette, Chief Executive Officer for Health Solutions at professional services firm Aon told CNN Business. Meanwhile, employers are expected to see their average healthcare costs soar by 6.5% to more than $13,800 per employee in 2023, according to Aon’s survey of 700 large companies.
That’s more than double the 3% increase in healthcare budgets that companies experienced for 2022. However, it’s still well below the 8.2% spike in annual inflation, as measured by the September Consumer Price Index. Workers are projected to shell out an average of 2.6% more for medical cover this year, compared to 2021, Aon calculated. That stems from a 0.6% increase in monthly premiums and a 5.2% jump in out-of-pocket costs, on average.
But employees may be spared from the full impact of inflation. After years of hiking deductibles, co-payments, and co-insurance levels, companies are hesitant to make it more expensive for staff to seek healthcare. So employers are making changes to their insurance plans to minimize the increases. “There’s been a real affordability crisis,” Doctor Jeff Levin-Scherz, Population Health Leader at advisory firm Willis Towers Watson explained.
However, employers don’t want to offer meaningless healthcare insurance plans for people. As such, 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 the same in the next two years, according to a Willis Towers Watson survey of 455 mid-sized and large companies.
A growing number of employers are also looking to shield lower-income workers from high healthcare costs. More than a quarter of companies surveyed said that staffers who are low-wage or hold certain types of jobs are being charged lower premiums in 2022. Another 13% are planning to or considering implementing similar measures in the coming two years, the survey said.
