Projected Healthcare Costs for 2023

After U.S. companies were just about ready to take a sigh of relief after the COVID-19 pandemic, healthcare costs increased in 2022. As 2023 approaches, it seems another medical plan cost hike is on the horizon.

On average, healthcare plan costs are expected to rise by at least 5.6% in 2023. This is making employers scramble to balance their budgets so they can continue drawing in the best talent without compromising employee healthcare plans.

Businesses still want their employees to be provided with quality care, to enhance their mental and physical health, and to create a marketing strategy for recruiting and retaining purposes.

Companies everywhere are already beginning to tackle this issue head-on by applying strategies to keep healthcare affordable and usable for employees. First, it helps to know how healthcare costs are rising, and why.

What is happening to healthcare costs?

Health benefit costs rose 6.3% in 2021 and increased 5% on average in 2022. Expert industry reports are indicating that another increase of 6% will be due in 2023, averaging 5.6%.

Another analytical survey predicted health care costs would increase by as much as 6.5% on average. Some experts are even predicting raises as high as 10% in some places.

Relative to financial measures, these percentages equal an average of up to $13,800 per employee. What was once a $10,000 employer cost in 2021 turned into $10,500 in 2022, which will increase again to about $11,200 in 2023. For the premium paid by the employee, this looks more like $2,500 in 2021, $2,670 in 2022, and $2,830 in 2023.

These costs are variable and contingent upon employers opting for the best practices possible to regulate these prices.

While these prices are still growing at a slower pace than what a person might see at a gas station or grocery store, coordination and communication will be the most effective measures to guarantee that their healthcare plan is balanced with employee premiums.

What are influencing healthcare cost factors?

There are a few key factors that directly influence the hike in healthcare costs. Employers got a break during the COVID-19 pandemic, having paid for medical plans at a 1.2% decrease due to the decline in private health insurance enrollment at the mercy of Medicaid and Medicare.

Now, medical plans are expected to go back to the previous levels found before the pandemic as the usage of private and corporate healthcare recovers. This is especially the case for employees who struggle with the long-term effects of COVID-19, including neurological and cardiovascular issues associated with the disease.

Those who were unable to receive traditional care for their chronic illnesses during the pandemic are now able to access their care. This is another nod to availability and utilization driving “supply and demand” costs.

Additional healthcare cost factors

What’s more, hospitals and commercial insurance companies are beginning to work more and more in a consolidated manner. This means there are more expensive costs related to their new cutting-edge technology, novelty drugs, and pricey insurance claims.

Employers only have a small amount of time to prepare for the sharp effects of inflation before 2024 comes around.

The other major influence is inflation, which is the reason for such an increase in other services and products in the U.S. Consumers choosing their healthcare plans in the last few months of 2022 will see a modest increase in cost compared to what it will be in the long run.

Inflation creates a lagging effect that is apparent in the difference between the rate of inflation vs. the increase in health benefits in 2023. Healthcare benefits will only be half the rate of inflation, which is about 7.7% as of October 2022. Inflation reached a 40-year high just by the summer of 2022.

Plus, healthcare plans used by employers usually take on multi-year contracts, which will take some time to reflect yearly inflation. Employers only have a small amount of time to prepare for the sharp effects of inflation before 2024 comes around.

How to improve healthcare plan affordability

Employers have just begun to reinforce their staffing by finding the best ways to attract and retain employees based on their needs for basic mental health and wellness.

In the past, businesses simply applied higher premiums to counter the pressing shifts in healthcare costs. At this point, however, a choice like that could impede efforts to recruit staff in the competitive labor market.

At a time like this, there is no going back for businesses that have instilled an environment where health is a number one priority for workers and their families. As a result, employers are coming up with strategies now to manage healthcare costs and augment affordability.

Employers believe that offering virtual healthcare solutions can deliver an alternative to bolster cost containment. This comes in the form of urgent, mental health, primary, or emergency care in the form of telemedicine.

Another priority has been to expand health access to include other programs, like behavioral health.

Other strategies include:

• Combining healthcare costs with salaries through a contributive effort. This can minimize the amount that lower-paid workers put toward their health coverage without adding costs to the employer.
• Increasing the types of voluntary insurance an employee can enroll in at will. This can leave health care costs, like supplemental insurance for critical illness or hospital bills, up to the employee.
• Finding insurance professionals to help hold an in-office workshop to teach employees the best methods for shopping for healthcare. This effort is a great way to educate staff on the most effective practices for choosing a plan. It also instills company transparency and holds insurance companies responsible.
• Implementing a policy that requires staff to see cost-effective physicians for payment coverage pre-approval. This way, client costs don’t skyrocket if the insurance company can’t pay for prescriptions or procedures due to pre-existing conditions.
• Comprehensively providing alternate assistance and reasonable accommodation for employees with chronic illnesses. Most of the time, these individuals need a vast network of doctors and specialists. By making the best efforts to decrease this need, healthcare costs will decrease as well.

Additional strategies:

• Increasing the number of benefit programs to include wellness, mindfulness, and physical fitness. A healthy workplace could find its employees are sick less often, and not cranking up their costs with constant doctor visits.
• Adding programs that hinder fraud and waste. These could be annual vulnerability assessments that can identify ambiguous billing and demographic information.
• Directly contracting with cost-effective networks and hospitals. This is to essentially set up voluntary payment models. The goal is to reduce costs and preserve quality care for employees.
• Funding more money for the HRAs. This leaves the contributions entirely up to the employer, and the health coverage up to the employee. If this is a new venture for a business, it may be worth it to hold a workshop on health reimbursement arrangements to educate staff on the ins and outs.

Healthcare costs are inevitable but health is vital

Costs are rising everywhere, and healthcare is no exception. Employers and private insurance holders are beginning to prepare for the predicted rise in costs for 2023 in the most innovative and careful ways possible.

The last thing employers want to do is compromise the care taken to hold onto their staff in this slippery job market. Cost may not be a problem, but without healthy and productive staff, companies will likely suffer an even greater financial hit.