Companies should expect higher healthcare costs, insurers say

US healthcare costs are expected to increase for employers this year, according to recent reports from insurers.

Healthcare costs reached a historic high in 2023, “with the medical trend rate climbing into the double digits for the first time,” according to Willis Towers Watson’s Global Medical Trends Survey. The experts at WTW said that although they envision some near-term improvement in healthcare trends this year, longer-term challenges will persist.

“While some cost increases are projected to ease in 2024, they remain at significantly high levels,” Linda Pham, senior director, integrated and global solutions at WTW, as reported in an SHRM article about the research. “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.”

Meanwhile, according to the results of Buck’s 45th National Healthcare Trend Survey, inflation, service use, technology, the addition of new programs and changes in the mix and intensity of services all play roles in cost increases. The survey included almost 100 health insurers and health plan administrators.

“Medical costs for employer-sponsored plans continue to outpace inflation, rising on average between 6.8% and 7.3%. That’s up from Bucks’s previous survey in May 2023, when insurers found medical trend factors were averaging 6.2% to 6.8%” according to SHRM. “Nearly three-fifths of insurers (58%) anticipate higher or significantly higher increases over the subsequent three years following 2024.”

Respondents to the Buck survey noted a weighted average prescription drug cost increase trend of 9.8%, up from 9.3% from the prior survey. 

The reasons, according to Buck, include an increase in prescriptions that “improve the quality of life and/or enhance lifestyles,” aggressive marketing campaigns, price adjustments to recover research costs and some drug companies increasing their prices for generic medications.

SHRM noted that some surveys in 2023 contained similar predictions.

“For instance, the International Foundation of Employee Benefit Plans found that employers are projecting a 7% hike for healthcare costs in 2024, while Aon projected that average costs for US employers that pay for their employees’ healthcare could increase 8.5% to more than $15,000 per employee in 2024,” SHRM reported.