As the fourth quarter nears, many employees start choosing their benefits for the next year. This fall, some may face sticker shock.
Businesses and companies that provide health care coverage are facing the largest spike in health insurance costs in the past 15 years, according to the Wall Street Journal.
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Several factors are driving up premiums: higher costs for hospital care; increased use of medical services for such illnesses as cancer, cardiovascular disease and joint problems; and the cost of prescription drugs, including popular weight-loss medications.
The professional services firm Aon estimates premiums will go up by 9.5% in 2026, to about $17,000 per employee. The company notes that this is the third consecutive year for near double-digit increases in health care costs.
A family plan costs about $25,000.
Future cost increases likely
Next year’s increases aren’t likely to be the last.
“Ongoing changes in the health care landscape and external economic pressures make it less likely that cost increases will return to more manageable levels in the future,” Aon said. It suggested that companies rely on what it calls predictive analytics and proactive risk management to deal with future cost increases.
A second business consulting firm, WTW, said that companies can expect a 9.2% increase in health care costs. Such projections would be the steepest rate increases since 2011.
Effect on employees
In response, employers are now adjusting plan designs and options for employees. They are also passing the costs onto workers through larger payroll deductions and higher out-of-pocket expenses, including increased deductibles.
Some employers may also limit access to certain doctors and hospitals through their employee health care plans.
Changes that companies are now pursuing
Troy Morris, CEO of Kall Morris Inc., an aerospace company based in Marquette, Michigan, told the Journal that the company’s health care costs rose 20% this year after a 9% increase last year. The company raised the out-of-pocket maximum for its workers on the family plan to $10,000, an increase of about $2,000.
Sixty percent of employers surveyed told WTW they may replace their health insurers and pharmacy-benefit managers.
Mutual of Omaha, which has more than 6,000 employees, confirmed it is seeking new health and drug benefit administrators. Managers are also looking into smaller vendors to increase options. The move comes after Mutual of Omaha stopped covering GLP-1’s, such as Wegovy and Zepbound, because of the cost of spending on the weight loss drugs.
Inflation and rising drug therapy costs are also affecting coverage rates.
“This is the worst I’ve seen,” said Pam Kehaly, CEO of Blue Cross Blue Shield of Arizona. “It’s happening so fast, it’s happening so broadly.”
