How Employers can Control Costs Despite Rising Healthcare Rates

With healthcare costs on the rise for 2023, HR consultant Mercer found that costs per employee are going to rise 5.6% for their medical plan in 2023, which is 1.2% higher than 2022. Premiums are expected to rise as well. The Affordable Care Act is estimated to increase 10%, which is especially hard on plan premiums that are employer-provided, because they are already 10% higher than ACA premiums.

These increases are due to many factors, including medical product and equipment inflation, as well as new legislation from the government with cost shifts. This is a perfect storm for increasing healthcare costs, with inflation rates along with the Inflation Reduction act coming into play. For example, the government is limiting how much the pharmaceutical industry can raise prices for participants of Medicare Part D. This reduces government spending by $100 billion within the next 10 years, but in doing so the revenue loss has to be recouped by the employer’s plans.

Complying with all the new regulations will be costly, because lawyers and federal agencies will inevitably be involved in evaluating whether or not patients and providers are taking action. Not only that, but rates for healthcare utilization are also expected to increase now that Americans are looking for care again post-pandemic. For employers, this poses a difficult decision: either take on more of the financial burden, or possibly lose employees due to pricier healthcare coverage.

In order for companies to remain competitive, they need to continue offering competitive benefits. Reevaluating your health plans and ensuring workers are actively choosing their benefits during open enrollment will help. All in all, employers really only need two health plan options, ensuring one plan is tied to HSA. To take it a step further, employers can adopt a service for reference-based pricing, which uses Medicare pricing and other benchmarks to price medical claims. This limits the amount an employer plan sponsor pays for certain prescription and medical services.

For more information contact Eric Allen Kauk, Esq., LL.M. at (813)-203-0208 for guidance.