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Healthcare Costs Expected to Spike in 2023
Many organizations are restructuring their benefits plans for the upcoming year, most in part due to the current state of the economy. The latest challenge we’re facing is how to address the impact of the rising levels of inflation when it comes to healthcare costs.
Healthcare Inflation Trends in 2023
If you sponsor a healthcare plan for your employees (or you are an employee), be prepared for sizeable increases in your costs in 2023. While there are many surveys available, we find the most forecast cost increases in the 6.50% to 8.00% range for 2023. According to AON, the average cost per employee is expected to surpass $13,800 for the year.
Healthcare inflation vs CPI – while headline Consumer Price Index (CPI) figures have been in the 8.5% range recently, healthcare inflation has actually been less. History shows that healthcare costs will generally outpace CPI by 2% to 4% per year so it’s reasonable to expect that absent a dramatic reduction in CPI, healthcare cost increases would easily hit double digits. In the ACA market across the US, preliminary cost increases are averaging about 10%.
So, What’s Happening With Larger Public Sector Entities?
We’re seeing some public sector healthcare programs already approving sizable increases to premiums for the upcoming year.
- New Jersey State Health Plan approved increases of nearly 20%
- Federal Employee Health Benefits Program announced an increase of 8.7% for employees and retirees
- Federal Reserve Bank of Dallas is also forecasting that rising medical workers’ pay will further increase healthcare inflation
Now’s the Time to Prepare
If your actuary is suggesting that your 2023 healthcare cost assumption may need to be revised, you can see that there is data to support it. Yes, you may have had a few good years (and hopefully many more to come) but the underlying data and trends suggest that the flattened healthcare inflation over the last several years is coming to a close.
If you have any questions on this, please reach out one of our Odyssey consultants. If you’d like to receive news like this straight to your inbox, please subscribe to our newsletter up above.