Health care costs are rising sharply, creating challenges for employers, including municipalities.
A convergence of factors is driving the trend, and experts predict that cost increases will continue well into the next decade.
One key factor is increased utilization. Since the COVID-19 pandemic, the demand for health care services has soared, particularly for mental health care, with usage levels far exceeding those seen a few years ago. At the same time, prescriptions and elective surgeries are on the rise, contributing to the overall surge in health care spending.
Adding to the pressure, the costs of delivering care are climbing. Labor shortages have hit health care providers hard, with an estimated 20% of nurses leaving the profession. This has driven up personnel costs, with most health care systems (particularly larger ones) requesting significant rate increases year-over-year. The unexpected increase in GLP-1 drugs being used for weight loss — a high-cost treatment for this condition — has added billions in unanticipated expenses to the system.
Further, low Medicare and Medicaid reimbursement rates mean private health care systems must offset these shortfalls, leading to higher costs for insurance plans. A recent Rand Corp. study showed that private health care costs are now more than two-and a-half times those of Medicare and Medicaid.
“While insurance carriers are actively negotiating to keep rate increases manageable, this upward trajectory looks likely to continue,” said Chris Bailey, director of MIIA’s Health Benefits Trust.
Municipal employers are advised to be prepared budget-wise, as health care costs are projected to rise through at least 2032.
For more information on how these changes may impact your municipality’s insurance plan coverage and costs, contact your municipal health insurance provider.
