Sometimes it takes time for certain aspects of inflation to have an impact.
Higher costs in healthcare is one such aspect, analysts say. Healthcare providers, insurance companies and employers meet regularly to make decisions about copays, premiums and prices ahead of the following year’s open enrollment.
“If you signed up for a health-insurance plan during open enrollment last year, those rates were set before all the inflation data was available,” Aneesh Krishna, analyst and partner at global management consulting firm McKinsey & Co., told MarketWatch.
Expect those rates to change, analysts told MarketWatch. In September, the cost of healthcare services increased 6.5% over last year. Although this was below the overall rate of inflation of 8.2%, it still represented the highest annual jump since 1993, according to government data released this month.
Hospital services and nursing-home costs rose 4%, while the cost of physicians’ services rose 1.8% year-over-year in September. Inpatient and outpatient hospital services increased by 3.9% and 3.4%, respectively, compared with last year.
“‘If you signed up for a health-insurance plan during open enrollment last year, those rates were set before all the inflation data was available.’”
— Aneesh Krishna, analyst and partner at McKinsey & Co.
Open enrollment refers to the time window when people can sign up for health insurance or make adjustments to their current plan, whether through their employer, Medicare or the Affordable Care Act marketplace.
When the 2022 Medicare open-enrollment period began in October 2021, inflation in the U.S. was 6.2% year-over-year. The Consumer Price Index hit 8.2% last year.
Health-insurance costs also rose 28.2% in September compared with a year ago and increased 2.1% month-over-month, according to the CPI data. Yet the prices for various categories of medical care did not change much, as consumers pay only a fraction of the increased amount of those services through their copays.
But price increases for healthcare are likely in the cards for next year, said Kayla Bruun, economic analyst at global decision intelligence company Morning Consult. “Consumers can only really choose between paying up or walking away,” she said.
In fact, insurers are already seeking steeper premiums for 2023. Early rate filings for 2023 Affordable Care Act marketplace plans show that insurers are seeking proposed median increases of 10%, according to a Kaiser Family Foundation analysis of filings in 13 states and Washington, D.C.
“Early rate filings for 2023 Affordable Care Act marketplace insurance plans suggest that health insurers are seeking proposed median increases of 10%.”
The hospital system is also under pressure. More than half of nurses said their workplace suffered from a severe staffing shortage, while 99% report a staffing shortage of some sort, according to the ShiftMed Annual State of Nursing report released last month.
As more contracts come up for renewal, hospitals will likely want to pass along the costs, Krishna said, but employers and health plans probably won’t be able to shoulder those costs. The healthcare system has a chance to address the challenges of higher costs by improving productivity, he added.
Still, the effect could be more subtle than straightforward price hikes, Krishna said, with increased costs meaning that employers may cut back on healthcare benefits. When employers’ healthcare plans cost 4% to 5% more this year than last, he said, “they start thinking about how can they cut down benefits.”
Another side effect of healthcare inflation: Consumers are more likely to forgo medical treatments, experts say, as the price of healthcare increases.