Inflation, rising wages and expenses, clinical workforce shortages and declining profit margins for healthcare providers are some of the listed reasons that actuaries across the US project a 7% year-on-year increase in medical trends. This increase is expected to impact both group and individual markets. Plans renewing their policies in 2024 will feel this increase most acutely.
What is medical cost trend? Simply, this is one of a few factors that medical underwriters use when they are calculating your renewal every year. Other factors include the number of your current and past claims, the age, gender and the home zip code of your employees. What this means is most plans renewing in 2024 will see a minimum of a 7% increase in rates and then add to that your 2023 claims history.
The 2022 medical trend was approximately 5.5% and 2023 was 6.0%. Many polices will see "good" renewals go from under double digits last year to double digit increases this year.
While none of this is good news, there are ways that employers can redouble efforts to contain costs. Some of these cost management components include making sure your broker is sharing and discussing with you plan innovations by the insurance companies. Many of them are focused on value-based care, ways to direct employees to doctors and providers to provide the best overall patient outcomes, thus reducing the need for costly follow-ups, utilizing telemedicine for primary and behavioral health visits and implementing robust preventative care and wellness programs. It is now, more important than ever, for organizations to take a proactive approach to their healthcare spend and work with brokers who are knowledgeable about the industry they serve to help organizations implement that plan.