In the summer and fall of each year, large benefit consulting firms and others start looking at what might be happening with medical costs in the next year. Those medical cost expectations then feed health plan premium increases or even benefit changes designed to control costs. With inflation running hot and uncertainty about the effect of CV-19 on health care costs, 2022 is kind of a wild card year. Insurers don’t like to lose money, so I expect premium increases will be much higher than in the past few years. This report from Willis Watson Towers gives that firm’s perspective on medical cost trends. (WTW Report)
Health care costs were estimated to have increased around 8% in 2021 and a similar increase is expected for 2022. While health plans can make some benefit changes that might limit the increase, many employers and groups should expect double digit premium increases and employees should expect more cost-sharing. Insurers said that delivery of unnecessary care by providers and seeking unnecessary care by members was a main driver of health plan cost increases, with around 60% of plans citing each factor. 38% said people not getting needed preventative care was a factor. I think utilization has little to do with cost increases. The underlying problem for years has been the growth in unit prices for medical services and products.
Employers are relying on telehealth to help control costs. While the unit costs for telehealth can be lower, there is no persuasive research evidence that extensive use of telehealth reduces overall health spending. I think we are in for a few years of very painful health plan premium increases, which won’t relent until we remove the market power of large health systems and reform drug pricing.