What’s happeningIn 2020, the first year of the COVID-19 pandemic, health care usage dropped dramatically as many people put off routine health care to avoid going to a provider and risk infection. Also, many providers stopped doing non-emergency care like knee replacements. In all, health insurers paid out far less in claims in 2020 than they did the year prior, even though many people were being hospitalized after contracting the coronavirus. Since then, medical care has returned to the same pre-pandemic level, but with a twist: All those skipped procedures in 2020 and 2021 are now being performed and most hospitals have backlogs for many procedures like colonoscopies and cancer screenings. Other contributing factors adding pressure on health care trends include: New technologies — This includes new technologies providers are using, as well as investments in telemedicine by both health insurers and providers. Catastrophic claims — The severity and cost of catastrophic claims continues increasing substantially. Chronic conditions — More Americans are battling chronic conditions, which can quickly drive up their cost of care. Blockbuster drugs — Pharmaceutical companies are developing groundbreaking, yet costly drugs that can cost tens of thousands of dollars a year. Specialty drugs — Doctors are prescribing more specialty drugs, which also have high price tags.
Employers curtail cost-shiftingAs costs have increased, employers seem to be absorbing most of the premium increases and have grown reluctant to pass on more of the premium cost to their employees. On average, employers subsidize about 81% of the plan cost, while employees pay the remainder. According to the Aon report, in 2022, when the average annual group health insurance premium increased 3.1% to $13,020 per employee, from $12,627 in 2021, employers took on more of the premium burden:
- Employers on average are paying out $10,500 for their portion of the premium, up 3.7% from $10,123 in 2021.
- Employees’ share of the premium increased only 0.6% during that same time to $2,520.
- As mentioned above, employees’ share of premium increased 0.6% to $2,520.
- Average employee out-of-pocket costs (deductibles, copays and coinsurance) jumped to $1,892 in 2022, up 5.1%.