November 26 – A single-digit increase in open enrollment has never looked better.
workers around Kern Countyunless they have an exceptionally generous employer, can generally expect significantly higher health insurance premiums next year – and the possibility of even larger increases in future years – in due to inflation and pandemic personnel costs that have not yet made their way into the healthcare system.
Individual rate increases vary widely due to factors such as coworkers’ health care utilization patterns and the employer’s share of costs. But estimates are that premiums could rise to twice or more the rate they increased last year as a first step towards catching up with industry cost increases.
This should come as no surprise: there have been recent examples of segments of the healthcare industry opposing the imposition of greater spending, or cutbacks, associated with a continuing severe shortage of workforce.
In July, Kern Medical narrowly avoided a strike by an employee union that was fed up with staffing shortages. That same month, the chain of hospitals Adventist Health made public a contractual dispute with California Blue Cross Anthem on reimbursement rates.
The higher costs involved in such disputes are usually passed on, if not entirely to the employers, at least to their workers. It’s usually at the end of the year that workers find out how much it’s going to cost them and what options they may have to cushion the financial impacts.
Over the next year, health care benefits increase in California will average 5.6%, more than three times higher than they have increased overall this year, according to an estimate shared by the CEO Brian Freeman of Tennessee broker rating company Mployer Advisor.
A separate screening per consulting firm McKinsey & Co. said employers could see their healthcare costs rise next year by 9-10%, more than double the increase they’ve seen this year.
Inflation is the main driver of the jumps, Freeman said, adding that consumers won’t feel the brunt of them yet because insurance companies aren’t renegotiating contracts with health care providers every year. That, combined with expectations that COVID-19 has become rampant, is a big reason McKinsey sees costs rising through about 2026.
“There’s frustration, as you can imagine,” Freeman said of employer responses to cost increases, which he added are mostly approved at the state level. “But the rates are kind of what they are.”
The next question is who will make up the difference, the employer or the employee?
Companies typically cover around 75% of the costs of health benefits for their workers, but this also varies. Companies that work the hardest to attract and retain top talent are often incentivized to bear a greater share of the costs. Others offer what they can afford by balancing monthly premiums, deductibles and out-of-pocket expenses.
CEO John McFarland at BakersfieldHorizon Human Resources, based in Horizon, said it was difficult to predict how companies would rebalance their benefits this open enrollment season to keep rates acceptable while potentially cutting some offers and shifting some expenses to workers.
“It’s always a balancing act,” he said. “It’s kind of like, ‘We can’t increase the premium because nobody can afford it.’
Go too high on co-pays for doctor visits, McFarland said, and employees won’t get the care they need. Another complication he pointed out is that young workers may place less importance on health benefits than on student loan repayment programs and tuition reimbursement.
Kern County human resources practitioner Robin Pagi relayed a range of responses when she asked her clients last week what they planned to do about benefits next year.
A company told him that it had experienced a 7% increase in premiums for its HMO and PPO plans, and that employer and employee costs had increased by the same amount.
Another employer Paggi works with said this year it was the first time it had expected to share benefit cost increases with employees, and the company planned to cover most of the expenses.
Another customer who responded to his inquiry said he would pay the full cost for employees who choose an HMO option.
“If the employee chooses a PPO from our plan,” the unidentified customer wrote in a response to Paggi, “they will pay the difference, regardless of the increase.”
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