Health insurance expenses are not just rising to unprecedented levels in 2023, but imposing a considerable hardship on people and families. Premiums for the typical Affordable Care Act (ACA) plan jumped an average of 26%. At the same time, employers are staring down the barrel of a 9% increase in the cost of their health benefits. These increases are occurring within the context of a larger trend of rising overall health care costs in America.
As health care costs continue to rise, more and more Americans are falling behind. As a result, the standard monthly premium for Medicare Part B has skyrocketed almost 10% this year to $202.90. Enrollees will see an average reality check in the form of a 114% increase in their premium payments. This dramatic increase in health insurance premiums is causing alarming concern about affordability and accessibility to health care services.
Factors Contributing to Rising Costs
Three important factors have contributed to rising health insurance premiums and soaring health care costs in general. One major driver—the biggest—is hospital consolidation, which has increased the price of services. Further, as hospitals buy up physician practices, the more it costs to deliver health care.
“The data clearly show that the largest part of the health care system — hospital care — is also the place where costs are the most out of control.” – PhRMA
This troubling trend of consolidation further limits patients’ access to affordable care, as there are often fewer providers available to compete for patients’ business. Insurers are required by law to spend at least 80% of their premium dollars on health care claims. This requirement has been made more difficult in recent years due to rising costs.
We know more Americans have been seeking more medical attention in recent years. The combination of a higher volume of physician visits overall and a shift in treatment paradigms towards more intensive interventions has further piled on the pressure. Because of this, premiums persistently increase as insurers work to address these increasing needs.
Impact on Employers and Employees
Employers aren’t the only ones hit by skyrocketing health care prices – projections show that employers will spend 9% more on health benefits this year. This increase creates a strain on the employers. They either need to eat the increases or shift them on to workers in the form of increased premiums and deductibles. Many companies are struggling to balance providing comprehensive health benefits while managing their own financial constraints.
Now very large firms are starting to cover GLP-1s for obesity treatment. By 2025, this coverage has blossomed to a remarkable 43%. It is working to ensure that ACA provides relief for people who are fighting obesity. Besides adding these concrete barriers to care, it adds to the overall costs of health benefits.
“There’s not as much incentive to drive the hardest bargain if you’re not on the hook for most of the increased prices yourself.” – Vivian Ho
An increasing number of employers are beginning to view weight loss medications as valid treatment alternatives for chronic conditions that affect a large share of their employees. With this shift comes the vital question of sustainability and long-term affordability.
Consequences for Medicare Enrollees
Of course, Medicare enrollees are not immune to these trends. The increase in Medicare Part B premiums has recently left millions of older adults staring down the barrel of unforgiving renegotiated budgets. As both the provider and enrollee cost burdens grow, more enrollees will have a hard time affording the care they need. Blue Cross Blue Shield of Massachusetts announced that it will stop covering weight loss medications in 2026. Even though this change would save premiums a small amount, it would limit access to life-saving, necessary treatments for those suffering from obesity.
The prevalence of chronic diseases among Americans is an urgent issue. As of 2023, more than three-quarters of Americans ages 18 and older say they live with at least one chronic ailment. This troubling statistic points to an impending demand for successful prevention and management strategies as well as affordable health care services to combat increasing costs.
With the rise of new medical clinics and telehealth providers, millions of Americans are finding it easier to get the health care they need. Major gaps continue to persist. It’s no wonder that state and local leaders have enjoyed the fruits of this progress. Many more continue to struggle with affordability and access to high quality care.