Rising Healthcare Costs: Mid-Year Check-In

We're halfway through 2022, and the cost picture is becoming clear. After two years of pandemic-disrupted trends, healthcare costs are rising, and rising faster than many employers expected.

What's Driving It

Deferred care catching up: The elective procedures and preventive care postponed in 2020-2021 are happening now. That pent-up demand is showing up in claims.

Provider cost increases: Hospitals and health systems face their own cost pressures: labor shortages, supply chain issues, general inflation. They're passing those costs through.

Pharmacy acceleration: Specialty drug costs continue rising faster than medical. New therapies launch at high price points.

Mental health utilization: Expanded mental health benefits are being used. That's good for employees but adds to cost.

Employer Responses

We're seeing various approaches:

Absorb and monitor: Some employers are absorbing the increase while watching whether it's a one-time catch-up or a new trend line.

Moderate adjustments: Small plan design changes (deductible tweaks, copay adjustments) to offset some of the increase.

Self-funding exploration: More employers asking about self-funded arrangements as a way to gain visibility and control.

PBM scrutiny: Pharmacy benefit managers are getting more attention as drug costs rise.

Looking to Renewals

Fall renewals will be telling. Early indications suggest:

• Fully-insured renewals in the 7-10% range are common
• Some employers seeing double-digit renewals
• Carrier willingness to negotiate varies

If your clients haven't started renewal planning, now is the time.

The post-pandemic cost environment is different. Strategies that worked in 2019 may not work in 2023.