Employers face higher health care premiums in 2023

Health insurance costs for businesses are increasing yet again for 2023.

In the small-group market, which covers employers with 1 to 100 employees, New York State regulators approved a 7.9% average premium increase for 2023, higher than the 7.6% approved for 2022, but much less than the 16.5% insurers had requested.

Larger firms, where rates are individually set with carriers, project their health care costs will jump 6% next year compared with an average 5% increase they’re experiencing this year, according to a recent survey by WTW, a global human resources consultancy.

Still, those modest increases are better than expected by many experts who say the effects of inflation have yet to be seen.

“I think we’ll see inflation play out in benefit costs over the course of three years,” says Dr. Jeff Levin-Scherz, a Boston-based managing director and the population health leader at WTW.

He explained there are many multiyear contracts between insurers and providers — largely hospital systems — still in effect that were negotiated before current inflationary times and don’t yet reflect higher reimbursement levels.

It’s when contracts come up for renewal that we’ll see the real impact of inflation on health care benefit costs, Levin-Scherz says.

James Eckardt, President of Peak Advisors Inc., a Holtsville-based health insurance broker, agrees.

“I still have concerns about future-year rate increases, he says.

He, too, said carriers typically enter into multiyear contracts with hospitals and provider groups.

“The concern is when these contracts come up for renewal in future years, the extremely high inflation rate affecting us all will catch up to these medical contracts, causing an increase in the cost of care, and in turn an increase in premiums,” Eckardt says.

Happily below expectations

In the meantime, the small scale of 2023 projected increases came as a surprise to many.

“I think most people were expecting a much higher increase only because of the inflationary pressure we’ve experienced,” says Gregg Pajak, managing partner and founder of the WizdomOne Group in Melville, providing wealth, insurance and benefit advice to business owners.

And some may experience that still.

The 7.9% for small groups is an average across multiple insurance carriers and plans statewide, Pajak says.

“Carriers could have plans higher or lower,” he says.

Lisa Robertson, co-founder of the Sexy Salad in Hauppauge, says she’s been quoted double-digit increases in recent years.

While she offers its employees health plans, none ever opt to participate in the plans due to the high costs for the employees' share. Instead they get insurance other ways, including going on their spouses' plans, she says.

ACA marketplace

Robertson and her husband, John, this year opted to get their insurance though the state insurance marketplace set up under the federal Affordable Care Act, New York State of Health. The rates, she said, are a bit better than the private market.

But “every year they keep going up,” Robertson says.

On top of managing costs, 42% of employer respondents cite managing employee affordability as a top priority, according to the WTW survey.

With that said, a lot of employers, as one solution, “are looking to offer health plans that might offer a trade-off of access to fewer hospitals and doctors for lower cost of care,” Levin-Scherz says.

Narrow networks are smaller networks offered by carriers that provide cost savings by limiting the number of providers and thus allowing them to negotiate lower reimbursements that result in lower overall premiums, Eckardt says.

Examples include Empire BCBS Connection network, UHC/Oxford Metro network, and HealthFirst Pro EPO network, he says.

Other solutions, says Pajak, include making sure their employees are aware of all their health care options. Older employees may find it more affordable to look into Medicare and purchasing a supplemental plan instead of taking the employer’s coverage, he says.

Other companies add spousal surcharges for employees that add a working spouse to their coverage and practice “salary banding,” offering a higher health care subsidy to lower-wage workers, says Levin-Scherz.

“Employers need to recognize there are large upward pressures in health care and put in place initiatives to counter those increases to keep health care affordable for employees and their business,” he says.