Insurers Say Health Care Costs Will Jump in 2024
Jan 11, 2024
There’s
more evidence employers should brace for higher health costs in 2024.
A
pair of new surveys finds that U.S. health costs will jump in the new year,
which may have significant implications for organizations.
According
to WTW’s Global Medical Trends Survey, the cost
of medical care benefits in the U.S. is projected to increase about 8.9 percent
in 2024, compared with 8.2 percent in 2023. Globally, though, the cost increase
will ease slightly to 9.9 percent after hitting a record high of 10.7 percent
in 2023, although analysts predict it will increase again in the coming few
years. Nearly three-fifths of insurers (58 percent) anticipate higher or
significantly higher increases over the subsequent three years following 2024.
Meanwhile,
a survey of nearly 100 health insurers and health plan
administrators by benefits consulting firm Buck also found that
medical costs for employer-sponsored plans continue to outpace inflation,
rising on average between 6.8 percent and 7.3 percent. That’s up from Bucks’s
previous survey in May 2023, when insurers found medical trend factors were
averaging 6.2 percent to 6.8 percent.
The
drivers of medical costs, according to insurers, range from new medical
technologies to overuse of care due to medical professionals recommending too
many services or overprescribing. Nearly half of insurers (49 percent) also
indicated that insured members’ poor health habits are among the top factors
driving higher health costs, according to the WTW survey, while 47 percent
cited the underuse or lack of preventive services as a significant cost driver.
“While
some cost increases are projected to ease in 2024, they remain at significantly
high levels,” said Linda Pham, senior director, integrated and global
solutions, WTW. “The high cost of new medical technologies is a key reason for
the persistently high trend. Furthermore, in some regions, ongoing geopolitical
conflicts and resulting displaced populations have negatively affected medical
costs due to an increased need for care and reduced availability of providers.”
Inflation
continues to be a factor as well. Although inflation has abated in recent
months, it’s catching up to medical costs.
“As
the price of gas, food, and other goods and services increases due to
inflation, medical trend factors used by insurers to set premium rates have
clearly been incrementally affected as well,” said Kelly Conlin, U.S. Health
Practice Leader and Chief Health Actuary at Buck.
Buck
found that prescription drugs will be especially costly in the coming year,
with health insurers reporting a weighted average prescription drug trend of
9.8 percent—up from 9.3 percent from the prior survey. Increases in specialty
drug utilization and “new drugs on the market” were cited as contributing to
the increase, Buck found. Many industry experts have pointed to the rise of
interest and demand for GLP-1
drugs as a weight loss aid as a contributor to growing health
care costs.
The
two new surveys of insurer predictions come after other surveys in 2023 made
similar predictions of rising health costs. For instance, the International
Foundation of Employee Benefit Plans found that employers are projecting a 7
percent hike for health care costs in 2024, while Aon projected that average
costs for U.S. employers that pay for their employees’ health care could
increase 8.5 percent to more than $15,000 per employee in 2024.
Considering
the high costs, employer inaction is not an option, said Debby Moorman, head of
health and benefits in North America at WTW. Things like telehealth options,
more well-being services and taking stock of existing benefits can help, the
WTW report found.
“Employers are
facing higher cost increases as well as the potential for significant
volatility, making it even more difficult to budget and plan,” Moorman said.
“Employers must understand their risk tolerance, review their current offerings
to ensure optimal value and explore strategies to balance cost pressures with
the need to support the employee experience. By understanding the factors that
affect health care and drive costs in their populations, employers can
effectively combat the ever-present threat of rising costs.”
Source: SHRM