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Increases in Medical Costs and Health Insurance for 2024

By August 25, 2023Commentary

One of the reasons I am convinced future inflation expectations are too low is that the way medical costs and health insurance premiums are treated creates far too low a number compared to reality.  By now, most health plans are providing renewal quotes for health insurance next year, and many provider contracts are being re-negotiated.  Aon is a large benefits consulting firm and has released its projection of medical costs for employer health benefit plans for 2024.  The firm expects an increase of  8.5% for 2024, to an astounding $15,000 per employee.  This increase compares to the 4.5% increase that occurred in 2023.  The driver for the cost increase is primarily providers demanding much higher payments, partly because their wage and other costs have risen sharply.  High-cost cases and complex therapy costs are accounting for a lot of the increase as well.

While employers bear most of the cost, the employees pick up a not insubtantial amount in premium sharing and in cost sharing for specific medical services received.   So consumers covered by employer health benefit plans will share the pain of this form of inflation.  And health care is 20% of the economy, so cost increases in that sector will flow through to overall inflation numbers.  And in terms of what consumers actually experience, just as with food, this will be highly visible to many people and will stress their budgets.   (Aon Report)

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