With health insurance annual enrollment period approaching, employers and employees alike are at heightened levels of concern over the potential for significant increases in renewal premiums and point of purchase cost-sharing. The combined impact of a slowdown in the U. S. economy coupled with an ever-increasing rate of inflation, has Americans anxious over “what’s next” in terms of cost increases and what will add to their financial stress.
Employers expect medical plan costs per employee to rise 5.6 percent on average, HR consultant Mercer reported. While significantly higher than the premium increase of 4.4 percent for 2022, the 2023 increase lags overall inflation, which is currently running at about 8.5 percent year over year. Since health care premium increases have consistently exceeded the CPI in almost every one of the past 40 years,
A large segment of American workers, and their families are already financially fragile – unprepared for regular household expenses, let alone out-of-pocket medical expenses. End-of-year health plan renewals anticipate significant increases in the cost of coverage (premiums, contributions) and/or higher point of purchase cost sharing (increased deductibles, copayments, out of pocket expense maximums).
Providing all Americans with access to affordable, quality healthcare is one of the greatest economic challenges of our time. To counter inflationary trends, plan sponsors should focus more on helping participants build savings rather than the purchase of more costly insurance – as part of a ’health and wealth’ strategy designed to optimize both savings and financial preparedness.
A Review of Insurance Rate Hikes
Each year, health insurers submit rate filings to state regulators, detailing their expectations for the coming year’s health costs. These filings provide insight into what factors insurers expect will drive health costs for the coming year, including inflation and policy changes.
Most premium changes insurers are requesting for 2023 fall between about 5% and 14% percent. Even though
the Affordable Care Act incorporates provisions that prompts a review of any rate increase in excess of 15%, insurance companies have more often than not been able to raise rates without explaining their actions to regulators or justifying the reasons for their premium increases.
Hint: Is anyone surprised that the range of anticipated increases does not exceed 14%?
With respect to coverage sourced through the public exchange, consumers receive little or no information about proposed premium increases. For self-insured employer-sponsored plans, there is no federal or state oversight with respect to renewal increases. In most years, healthcare inflation and utilization trends are key drivers of premium growth in the coming year.
Before the Act, insurance companies in many states increased health insurance premiums with little oversight, transparency or public accountability. This lack of authority and resources for states created an uneven playing field for consumers and contributed to unjustified premium increases in some states. That uneven playing field remains in effect for employer-sponsored self-insured health plans, and generally, employer-sponsored insured plans.
Premium rates for marketplace plans are already substantial. It is one reason why few Americans enroll in marketplace exchange coverage unless they qualify for taxpayer financial support. As part of the Inflation Reduction Act, the Senate passed a three-year extension of enhanced subsidies for people buying their own health coverage on the Affordable Care Act Marketplaces. These temporary subsidies were originally slated to last two years (2021 and 2022) as authorized by the American Rescue Plan Act (ARPA).
The timing of the Inflation Reduction Act matters for insurers, regulators and administrators of state and federal Marketplaces – and obviously, for some who might vote in the November 8th, 2022 mid-term elections (as rates are required to be published prior to the November 1st 2022 start of the open enrollment period).
According to KFF, whether subsidies expire at the end of this year or in two or three years, their expiration would result in a very steep increase in out-of-pocket premium payments. Because the Inflation Reduction Act extends the enhanced subsidies for three years and not permanently, no one can predict whether additional extensions will be approved or if the subsidies will be allowed to, eventually, expire.
Employer Sponsored Health Plans need to take a holistic approach to employee health benefits. Plan sponsors and brokers should take strategic action and make changes that ensure that their employer-sponsored, self-insured plans incorporate the most effective strategies available to address today’s inflation and economic challenges. These strategies include effectively designed acquisition cost-based pharmacy pricing, HSA-capable coverage, reference-based pricing, adequate participant protections against balance billing, participant advocacy, and litigation support.
As your partner, aequum is here to help “level the playing field” by implementing strategies that lower costs, achieve savings and support your plan’s member experience and success in 2023 and beyond. Please contact us if you have any questions or need support. For more information, visit www.aequumhealth.com.