Plan Premiums To Soar Along With Health System Labor Increases

Employer-sponsored health plans will likely see premiums increase by an average of 6.5% in 2023. The main driver? A shortage of health care employees, notably nurses. This is forcing health systems to pay more to current employees and offer more to recruit hard-to-find professionals.

The word comes from Fitch Ratings, based upon reports from the Bureau of Labor Statistics, McKinsey and Co., and Aon. Analyzing these disparate sources, Fitch forecasts that providers would pass on the increase in spending to insurers, which in turn will offload them to their clients.

After a slowdown in premium escalation for this year’s coverage (average 3.7% hike), the pandemic-fueled provider labor shortage will hit plan sponsors (and members) next year. Fitch says the BLS report that health system labor costs grew 25% between 2019 and 2022.

“Medical facilities have experienced staffing issues, principally for nurses, for years prior to the pandemic. However, the pandemic exacerbated these issues, as physically and emotionally exhausted physicians and nurses retired or simply left the industry for other careers,” Fitch says.

“As the demand for caregivers has outstripped supply, wage increases, overtime costs and drastic payment-rate increases for contract agency nurses, they have sharply increased the cost and limited the ability for health care facilities to maintain adequate staffing.”

Other costs have increased as well between 2019 and 2022: supplies and services up 18% and 16% respectively, pharmaceuticals up 21%.

However, Fitch notes, it could be worse: The projected increase remains below the 8.3% CPI inflation rate. Small solace for plan sponsors seeking the ever-elusive predictable annual premium increase.

“​​Rising medical costs for employer-based insurance plans will likely be borne primarily by employers and, to a lesser extent, employees through higher premiums, owing heavily to the tight labor market,” Fitch notes, referring to employers’ reluctance to gut the health plan when finding good employees remains a top priority.


Source Link