2023 Renewals. How Inflation May Impact Your Future Outlook

Inflation continues to impact Americans across the country. Rising costs contribute to ongoing challenges for both employers and employees who are also fighting a tight labor market and higher interest rates. With renewal season fast approaching, businesses may have to move forward with limited budgets while competing to offer competitive compensation and comprehensive healthcare and benefit options.

Inflation has reached the highest level the United States has seen in 40 years. The Consumer Price Index rose 9.1%, higher than the 8.6% seen in May. Leading us to believe that inflation rates will continue on this trend. And while health insurance has traditionally had higher rates of inflation than the rest of the economy, the healthcare industry is sure to follow.

The rest of the economy has the ability to set prices as needed throughout the year, creating quick inflation. For example, when companies pay more for their product, they can usually raise prices to consumers right away. Similar to what we have seen with gas and oil prices.

Healthcare prices, on the other hand, are set in advance. Government programs or private insurers negotiate rates, usually on a yearly basis. Premiums are locked in and contracts are signed with hospitals and doctors. And because inflation skyrocketed in 2021, after these rates were negotiated, employers and employees likely won’t see increases in their premiums, copays and coinsurance until this renewal season.

Inflationary adjustments haven’t had a chance to reach the healthcare industry—yet.

Employers need to have a strategy to properly navigate the renewal cycle this year. Whether fully insured or self-funded, employers should recognize how inflation will affect their insurance programs, strategizing with their advisors to decide what options best suit their unique workforce. Depending on their insurance model, employers, and employees, will be affected differently. For example:

• Fully insured employers – employees are already paying high deductibles, co-pays, and health costs. Additional costs or higher out-of-pocket payments will have a devastating effect on employees who may be unable to afford cost increases.
• Self-funded employers – these programs are designed for employers to have full control of their costs. This also means employers are responsible for all costs following employee payments. Increased costs for employers could have serious consequences on the organization’s budget.

Those under the individual marketplace could also see a more significant increase in 2023 due to inflation. Insurers in the Affordable Care Act (ACA) propose an increase of 10% according to a study by Health System Tracker, by The Peterson Center on Healthcare and KFF.

The study focuses on several key factors that influence costs in the next year. These factors include: medical cost trend, ongoing effects of the pandemic, and federal policy changes such as, the No Surprises Act which protects patients from surprise medical bills, and the possible expiration of the American Rescue Plan Act.

While this study was focused on the Affordable Care Act markets, Health System Tracker found these factors may affect the whole system, rather than the ACA solely, with most insurers considering premium changes of “about 5% and 14% percent.”

Preparing for increasing healthcare costs needs to happen now.

All employers should take an in-depth look at their health care programs this renewal. Working with their advisors to gather important plan data used to navigate supply chain shortages, high inflation rates, and impending premium increases.

Whether that means transitioning to a partially or fully self-insured plan to gain more control, deploying a robust pharmacy drug sourcing strategy, or assisting employees who are trying to navigate to the highest quality healthcare providers or looking into direct contracting. Options are available.

Navigating high costs, this renewal could be more complicated due to the tight labor market. Employers will need to manage renewals in a way that doesn’t transfer high costs to employees while staying on budget. Conversations with advisors like us need to happen now before renewals begin. We can help examine trends within the plan to better understand total spending and strategize ways to lower costs to the business and employees.

The past two years have been difficult for all organizations, and the challenges are not over. As we recover from the pandemic and inflation continues, employers will have a lot to consider.

If you want to discuss your health insurance plan, make data-based decisions and strategize ways to protect your business and people, contact an advisor today. At Conner, we are ready to hear your concerns, build relationships, solve problems and pursue excellence with you.