It's no secret that
According to HR consultant Mercer, U.S. medical plan costs per employee will rise by 5.6% in 2023, 1.2% higher than last year — and premiums will rise with it. The Kaiser Family Foundation estimates that Affordable Care Act plan premiums will see a 10% hike, a number that does not bode well for employer-provided plan premiums, which are on average 10% higher than ACA premiums.
"We are definitely anticipating an increase in premiums and just the general cost of healthcare going into 2023," says Christine Cooper, CEO of Aequum, a company that protects employees from unjust medical bills. "Noticeable increases are due to a number of factors, from the inflation of medical products and equipment to cost-shifting as the government introduces new legislation."
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Cooper describes a perfect storm for spikes in healthcare costs, as record inflation rates and new federal policies such as the Inflation Reduction Act come into play. For example, as stipulated in the IRA, the government is now limiting how much the pharmaceutical industry can raise its prices for Medicare Part D participants. This will reduce government spend by $100 billion in the next 10 years, but that loss in revenue is going to be recouped by employer plans. Cooper also notes that while the No Surprises Act and Transparency Rule were meant to benefit patients by giving them more buying power, it will likely lead to additional costs as well.
"With more transparency, there's a lot more information now that will reveal to providers if they're below market price," says Cooper. "There's no reason you wouldn't anticipate them raising their rates to hit that median."
Compliance with these new regulations will also come at a cost, since federal agencies and lawyers will become involved in evaluating whether providers and patients are taking reasonable action. On top of that, healthcare utilization rates are expected to jump as Americans who delayed treatment over the pandemic start looking for care again, explains Cooper.
Employers are in a precarious position: either shoulder more of the financial burden or potentially lose workers with pricey healthcare coverage.
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"For businesses to remain competitive, they need competitive benefits," says Cooper. "They have to control costs and be a disruptor in this [trend]."
Cooper advises employers to deviate from their status quo by reevaluating their health plans and making sure employees are actively evaluating their choices when open enrollment comes around. Cooper believes employers only need two health plan options, with one being tied to an HSA. If employers want to take it a step further, Cooper suggests adopting a reference-based pricing service, which prices medical claims based on Medicare pricing and other relevant benchmarks. RBP essentially limits how much an employer plan sponsor will pay for specified medical or prescription services.
"It allows the employer to take advantage of government price controls while continuing to pay providers a reasonable fee for their services," she says. "If you add inside limits, such as reference-based pricing, and combine that with an HSA account, you can have a huge competitive edge."
Employers may also want to consider connecting with a company like Aequum, which legally defends employees and their dependents against unreasonable medical charges, says Cooper. At the end of the day, employers have to ensure that no one is overpaying for care.
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As for any cost-saving changes on the horizon in the U.S., Cooper doesn't think employers should get their hopes up. While healthcare reform and Medicaid expansion in states like Oregon and South Dakota are up for a vote in the midterm elections, there is bound to be little impact on employer-sponsored plans, which is regulated by the Employee Retirement Income Security Act, or ERISA.
"The states and what they do doesn't affect ERISA plans, which are driven by the federal government," says Cooper. "Regardless of who is in office, we won't see drastic changes like a single-payer structure."
Instead, Cooper predicts the U.S. will continue to see litigation targeting the ACA, as well as new legislation like the No Surprises Act — meaning federal judges may have more influence on healthcare legislation than elected officials.
"We will hopefully see some small steps in reform that will benefit employers and employees," she says. "But currently we are seeing things that look like it's benefiting employees while just adding cost."
