How can inflation affect health insurance? Will plan prices increase?
The majority of companies providing health insurance plans are likely to increase premiums for 2024 with the median change being 6 percent more.
Health costs generally outpace other sectors of the US economy but the last two years have been an exception. However, because medical inflation typically lags behind what is experienced in the rest of the economy, broader inflation, which peaked in mid-2022, is expected to flow through to the health system.
This will put upward pressure on premiums for next year. The Peterson-KFF Health System Tracker looking at data from 320 insurers participating in the ACA marketplace found a median proposed premium increase of 6 percent. A more detailed analysis showed a median 9 percent rise in proposed premiums.
How can inflation affect health insurance? Will plan prices increase?
The key driver to the growth in premiums is medical trend according to Peterson-KFF. This includes the expected utilization of health care as well as cost increases paid by insurers for medical services and medications. Many insurers, while they expect utilization to grow relative to 2022, it’s price growth which the study sees as the larger portion of the medical trend.
“Significant inflation in the cost of goods and services in all sectors of the economy has had a profound impact on the cost of medical services,” says Blue Cross Blue Shield of Rhode Island. The health insurance provider “expects to see substantial increases in provider unit costs for 2024.”
The Kaiser Foundation Health Plan of Washington foresees, as hospitals seek to recover financial losses incurred in 2022, that inpatient cost per day will increase. Some of the common ailments of the post-pandemic period such as labor and supply shortages as well as general inflation forbode higher unit costs this year and next.
Beyond paying out for policyholders’ medical care expenses, insurers are also having to account for increased administrative costs. Broader inflation in the economy is thus also contributing to higher proposed premiums in 2024, albeit a minor portion. Blue Cross Blue Shield of Vermont says base administrative costs will raise premiums 0.1 percent for individuals and 0.3 percent for small groups.