Healthcare Costs Set to Increase in 2023

Employers will be searching for initiatives to control benefit costs as healthcare costs are set to increase an estimated 7 percent in 2023.

“Medical plan cost increases for 2023 are returning to pre-pandemic levels, despite significant fluctuations as deferred care rebounded and COVID-19 variants peaked. While it’s anticipated that previously observed spikes related to COVID-19 should moderate over time, the long-term impact on health plan costs of new variants, treatments, and long COVID is difficult to predict,” said HR consultant Segal who conducts an annual survey of health plan cost trends.

Segal’s survey respondents project that per-person cost trends for open-access PPO/POS plans will rise 7.4 percent in 2023.

That projection is in line with the International Foundation of Employee Benefits Plans (IFEBP) Health Care Costs Pulse Survey: 2023 Cost Trend which found a median 7 percent expected medical plan cost increase this year.

“With health care benefits costs expected to return to pre-pandemic levels and to continue outpacing inflation, employers can take steps to curb their benefits expenses,” reported Katie Navarra for the Society for Human Resource Management.

2023 Segal Health Plan Cost Trend Survey Findings

For 26 years, Segal has conducted an annual survey of health plan cost trends to give plan sponsors the information they need to help make decisions.

During the summer of 2022, Segal surveyed managed care organizations, health insurers, PBMs and TPAs. Collectively, the survey respondents represent more than 80 percent of the commercially insured and self-insured market.

Some of the key findings, in addition to the 7.4 percent per-person cost increase for open-access preferred-provider plans, included:

• The projected annual cost trend for outpatient prescription drugs is expected to be approaching double-digit levels, the highest rate observed since 2015.
  
  
• Double-digit specialty Rx cost trend, mostly driven by price increases and new-to-market specialty drugs, continues to be a major driver of Rx cost trends.
  
  
• Provider price increases are still the primary driver for hospital, physician, and Rx trends.
  
  
• Trend projections for most dental coverages are expected to reach 4 percent, driven by inflation across the U.S.

Primary Reason for Healthcare Cost Increases

The International Foundation of Employee Benefits Plans (IFEBP) Health Care Costs Pulse Survey: 2023 Cost Trend is designed to help U.S. plan sponsors navigate the changing landscape and learn about healthcare costs for the coming year.

The IFEBP surveyed 300 corporate/single employers, public employers/governmental entities, and multiemployer benefits funds.

When employers were asked to identify a primary reason for cost increases in 2023, they said:

• Catastrophic claims: 17 percent
• Medical provider costs: 14 percent
• Utilization due to chronic health conditions: 13 percent
• Utilization due to delayed preventative/elective care during the pandemic: 12 percent
• Specialty/costly prescription drugs: 10 percent
• Stop-loss insurance premiums: 6 percent
• Utilization due to demographics: 5 percent
• Covered lives due to increases in staffing levels: 2 percent
• Utilization due to unhealthy lifestyles: 2 percent
• Utilization of high-cost medical technology: 1 percent.

18 percent of the respondents were evenly split between “not sure” and “none of the above.”

“New prescription drugs, life-saving therapies, and deferred care during the pandemic (leading to late-stage diagnoses) are driving up health care costs, according to Tim Stawicki, senior director, and chief actuary at WTW,” reported Navarra.

Strategies and Initiatives to Control Health Costs

Segal says there are some key medical and pharmacy cost-management strategies that employers can consider to help control health costs, including:

• Competitive bidding
• High-cost patient case management and managing risk
• Cost-management negotiation service for out-of-network services
• Patient clinical tools and design
• Plan design strategies
• PBM contract review
• Clinical controls

“Planning is critical to developing strategies that can reduce costs. This may include virtual primary care networks, revisiting cost-sharing equations, incentivizing employees to seek lower-cost care options, alternative payment methods, and more,” wrote Navarra.

In the IFEBP survey employers said the initiatives they anticipated to have the most impact on controlling health costs in 2023 were:

• Purchasing/provider initiatives (e.g., telemedicine, price transparency tools, centers of excellence, health care navigators/advocates, coalitions quality initiatives): 24 percent
  
  
• Cost-sharing initiatives (e.g., deductibles, coinsurance, copays, premium contributions): 21 percent
  
  
• Utilization control initiatives (e.g., prior authorization, case management, disease management, nurse advice lines): 13 percent
  
  
• Plan design initiatives (e.g., dependent eligibility audits, high-deductible health plans, wellness initiatives, spousal surcharges/carve-outs): 11 percent
  
  
• Administration/data analysis initiatives (e.g., claims audits, utilization analysis, data warehouse, predictive modeling): 9 percent

Navarra says that HR and company leaders can play a role in educating employees about rising costs and tips for minimizing expenses.

“It's important that employers get the message out about preventive care which the Affordable Care Act requires insurers to cover in-network at no cost to plan participants," Kim Buckey, vice president of client services at Optavise, a benefits education, enrollment, and health care transparency firm," told SHRM.

Buckey continued: “Annual check-ups, for instance, can detect health issues before they become more expensive to treat. It's also helpful to remind employees of available tools and resources to help them gain control over their physical, mental, and financial health.”