25 February 2024

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Projected Health Insurance Cost Increases for 2024 Revealed

Projected Health Insurance Cost Increases for 2024 Revealed

According to a recent survey, healthcare insurance costs are expected to reach a 10-year high in 2024, yet many businesses are allegedly eager to bite the financial bullet for their employees.

Employers’ healthcare expenditures are expected to climb from 5.4 percent this year to 8.4 percent next year, according to health benefit specialists Mercer, which is part of Marsh McLennan, Aon, and Willis Towers Watson. They ascribe it to medical inflation paired with increased demand for weight-loss medicines and costly gene and cellular therapies.

In August, inflation was around 3.7 percent, still above than the Federal Reserve’s target of 2 percent. Following several hikes that raised interest rates to their highest level in two decades, the Fed announced no further increases.

According to the New York Times, the short-term benchmark interest rate will remain above 5% next year and will fall to roughly 4% by the end of 2025—still more than double the final rate in 2019. Due to contracts and procedure costs agreed upon between hospitals and insurers many months in advance, medical inflation generally lags consumer inflation.

According to Mercer’s poll of over 1,700 companies, more than two-thirds of employers either do not plan to pass on any cost increases to their employees or would pass on less than the predicted increase in 2024.

“They don’t want to add more financial stress on employees who are also coping with inflation, especially in this time where they’re really relying on their health benefits as a way to keep employees working for them on health insurance,” said Beth Umland, Mercer’s director of health & benefits research, according to Reuters.

The expected 5.4 percent increase, of which 1 total percentage point is totally accounted for by diabetes and obesity medicines, stems from the possibility that many employers will bear the costs.

“If they made no changes, respondents indicated that the cost for their largest medical plan would rise by an average of 6.6 percent,” according to the research. “The relatively small difference between the size of the projected increases before and after plan changes indicates that most employers are not making cost-cutting changes to their plans, reflecting concerns about employee healthcare affordability.”

Large employers, defined as those with 500 or more employees, have been able to avoid passing on costs to employees. However, smaller firms with 50 to 499 employees that often offer complete health insurance plans had a higher average initial renewal rate of 7.5 percent.

Employers who absorb these raises make workers less likely to hunt for other employment, according to the survey.

Health Insurance After COVID-19

When the “Great Resignation” began in the midst of the COVID-19 pandemic, employees frequently cited low pay, employee disrespect, and healthcare as reasons for departing or changing jobs.

According to a YouGov poll of 1,400 persons in 2021, one-third of part-time and full-time workers who receive health insurance through their workplace said they would be very or somewhat inclined to resign if they could get insurance elsewhere.

That figure was greater than in the previous year’s Gallup poll when one in every six employees stated the same thing.

Workers and labor unions are currently in the spotlight as a result of the ongoing SAG-AFTRA and UAW strikes on health insurance.

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