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How Inflation Is Affecting Health Insurance Plans

June 20, 2022, by New City Insurance

heart and stethoscope on light grey tableMany threats affect America’s healthcare system but few are as widespread as inflation. Inflation is defined as a reduction in purchasing power of a given currency that occurs over time, resulting in an increase in the cost of goods and services. In the healthcare industry, the biggest concern is rising medical care expenses.

The US has the most expensive health care system in the world. Healthcare spending grew 9.7% in 2020, according to the Centers for Medicare & Medicaid Services (CMS), reaching an astonishing $4.1 trillion, equating to approximately $12,530 per person.

Americans are currently spending a large amount of money on healthcare each year due to high deductibles, high insurance premiums, co-pays, and other out-of-pocket costs. There are many causes of increasing healthcare costs, such as an increase in population, an aging population, and changes in disease incidence and prevalence.

For many companies, the impact of inflation on health insurance plans has had a noticeable impact on their return of investment and their business as a whole. To account for these changes, employers must review their budget and determine how best to compensate for rising health insurance costs.

Feeling The Pressure Of Inflation

Inflation is continuing to affect the healthcare industry in unprecedented ways. With the annual increase in health benefits costs generally outpacing inflation, companies face ongoing challenges when planning for employee healthcare. The extent to which rising medical services affect employers is dependent on their insurance model.

  • Fully Insured Group Health Plans – With a fully insured group health plan, premiums are set by the insurance company before the year begins. However, employees are often required to pay certain healthcare expenses that are below the plan deductible out-of-pocket. They may also be charged co-pays once they reach their deductibles.
  • Self-Insured Group Health Plans – With a self-insured group health plan, the employer is responsible for all healthcare claims that exceed what an employee pays under the plan. For unexpected “catastrophic” claims, most employers have reinsurance coverage.

With inflation soaring and prices rising across nearly all sectors, it is no surprise that companies are feeling the pressure. Healthcare facilities are forced to pay more for supplies, employee costs, and utilities; therefore, insurers and patients are charged more for services. In turn, prescription drug costs and health insurance premiums are rising.

Rising Healthcare Costs

graph showing the high cost of health care with usd bank notes a stethoscope and calculatorPeople remain affected by inflated prices on consumer products like food, utilities, gasoline, and household products. Businesses are also directly impacted, starting with a shortage of certain products and services. When these shortages occur, companies are often forced to increase their prices, an adjustment that can trigger a detrimental cycle of rising costs. This process makes it more difficult for companies to reach their margins and achieve adequate profitability.

The price of medical care remains the single largest factor behind healthcare costs, accounting for approximately 90% of spending, according to BlueCross BlueShield. This spending includes the cost of caring for an aging population, those with long-term or chronic medical conditions, and the rising costs of new medications, technologies and procedures. Before inflation started to set in, the healthcare market had already entered a labor crisis. A record number of workers had either changed careers or left the workforce due to burnout, pandemic stress, and the steep cost of living. With inflation continuing to add pressure to companies’ bottom line, everyone is feeling the effects.

Industry data sources are forecasting increases in certain healthcare plans, such as preferred provider organization (PPO) plans. According to the 2021 Milliman Medical Index, PPO plan costs for individual coverage are expected to reach $6,516 by year-end, up from $6,052 the year before. PPO costs for the average family of four are projected to reach $28,256, up from the previous year’s $26,078. The cost of healthcare plans is expected to continue rising.

Other Cost Factors

Rising healthcare costs have many contributing factors outside of inflation. A combination of long-term factors has driven healthcare costs in an upwards progression and these costs are likely to continue increasing over the next several years. Healthcare trends are complex and consist of multiple components that have a direct or indirect impact on health insurance plans.

Some of the biggest cost factors affecting health insurance plans include:

the cost of healthcare

  • Growing US Population of Unhealthy Residents – According to the Center for Disease Control and Prevention (CDC), at least half of the country’s population suffers from at least one chronic health condition, such as diabetes, heart disease, or asthma. Residents becoming more overweight and unhealthy has been accompanied by a significant increase in the cost of annual health insurance premiums. Data published by the Kaiser Family Foundation (KFF) showed an increase in average premiums for family coverage from $15,073 to $22,221 between 2011 and 2021.
  • Providers Focus on Quantity Over Quality – Most insurers, including Medicare, use a fee-for-service system to reimburse hospitals, doctors, and other medical professionals for each procedure, test, or visit. This means that medical providers earn more when they see more patients in a day. In addition, the US medical system is not integrated, meaning providers and support teams do not communicate with one another regarding a patient’s care. This lack of communication and collaboration can result in a patient paying for more tests and procedures than they actually need.
  • New and Improved Technology – A study published in the Journal of the American Medical Association (JAMA) revealed that Americans often associate newer procedures and advanced technology with better care. This widespread assumption has resulted in many providers and patients demanding new and innovative technologies and treatments. Of course, new and improved technology comes at a cost that contributes to the cost of health insurance.
  • Lack of Healthcare Cost Knowledge – When it comes to many areas in life, such as buying a car, the cost is often analyzed very closely. However, in healthcare, most patients do not research or even consider the cost of a visit, procedure, or treatment before seeing their provider. This lack of healthcare cost knowledge has resulted in an increase in surprise medical bills. In January 2022, Congress passed the No Surprises Act which aims to decrease the occurrence of surprise medical bills under both individual and group health insurance plans, resulting in greater transparency and an improved patient experience.
  • Abundance of Concentrated Markets – Today, many medical providers and hospitals are in a position to demand higher prices. An increase in provider consolidation has resulted in a decrease in individual market competition. When there is low competition, providers are in a better position to drive up prices. According to a study published in the American Journal of Managed Care, hospitals in concentrated markets were able to charge much higher prices for the same or similar procedures performed in hospitals in competitive markets.
  • Threats of Medical Malpractice Suits – Lawsuits have become more common in our modern society, causing many healthcare providers to fear medical malpractice suits. In an attempt to satisfy patients, many providers approach patients with a “defensive medicine” approach in which they prescribe medications, tests, or treatments that may be unnecessary simply to avoid a lawsuit.
  • Limited Options of Health Insurance Plans – Not everyone has choices when it comes to health insurance plans. According to KFF, more than 49% of US citizens receive health insurance through an employer. This means that these employees are limited when it comes to decisions regarding the cost of their health insurance as it has been predetermined by their employers. Many businesses choose to buy more costly health insurance plans as the coverage is tax-deductible for the company and tax-exempt for employees.

How Companies Should Adjust

With inflation and other factors affecting health insurance plans, employers are trying to keep coverage costs manageable without putting excess strain on their employees’ finances. This involves identifying and implementing certain cost-management strategies in an attempt to keep increases at sustainable levels. Cost-sharing, a cost-management tool that shifts a large share of health services costs onto plan enrollees, is not supported by most employers due to the known financial strain it has on employees.

To help manage rising healthcare costs, employers should consider exploring strategies like self-funded or partially self-funded health insurance plans. Depending on the unique workforce demographics, a self-funded plan may be more cost-effective than a fully insured plan.

There are also other ways that employers can help keep health insurance costs manageable, such as choosing the right plan features. Plan features that can help keep costs manageable include offering telehealth services, requiring preapproval prior to receiving scheduled inpatient services, and contracting directly with cost-competitive, high-quality providers and hospitals for in-network coverage. Costs are generally lower when a patient visits an in-network provider because the insurance company contracts lower rates.

man giving employee a wellness plansFinally, companies can better adjust to changes in health insurance plan costs by offering employees a wellness plan. Most employers understand that happiness and overall well-being play critical roles in an employee’s health and workplace performance. A quality wellness program can help improve employee engagement and create a positive culture of health and happiness. Healthy employees are also less likely to take time off of work to visit their doctor and more likely to maintain loyalty to the company that appreciates them and cares about their health.

Work With New City To Ensure Your Company Is Set

Inflation is having a serious effect on health insurance plans and employers across the country are feeling the pressure. With help from New City Insurance, businesses can develop custom plans to reduce their insurance expenses and improve employee benefits for their employees. To learn more about how inflation is affecting health insurance plans or to speak with an experienced employee benefits consultant, reach out to the experts at New City Insurance.

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New City Insurance
New City Insurance
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Briar Schwartz
Briar Schwartz
05:38 10 Apr 25
Working with the team at New City Insurance was a great experience, couldn’t recommend it enough. Being completely new to the insurance world, both Clayton and Eric were thoughtful and kind, and most importantly patient with my many questions. All in all 5/5 stars. Thank you New City!
Iris deBruin
Iris deBruin
03:24 10 Apr 25
The team at New City was incredible. Clayton walked me through every step, made everything easy to understand, and was always there when I had questions. I felt supported the whole way through—can’t recommend them enough!
Lea R
Lea R
22:46 09 Apr 25
New City was outstanding from start to finish. Incredibly professional, responsive, and genuinely caring. They made everything easy to understand and completely stress-free. Couldn’t recommend them more!
Brooks Chiongbian
Brooks Chiongbian
21:21 07 Apr 25
I ran into an issue with our carrier and Nick got right to the bottom of things. He and his team were incredibly responsive and helpful, making what could have been a frustrating situation so much easier to handle. They really went above and beyond to make sure everything was resolved quickly and smoothly. I’m super grateful for their support and highly recommend New City Insurance to anyone looking for a team that truly cares about their clients!
Elizabeth Teposte
Elizabeth Teposte
23:35 02 Apr 25
My Experience with New City has been amazing. Team Eric has been great, especially Nicholas Rebis their follow up time is a 10/10. I'm currently helping an employee out with her questions and have been running to Nicholas, before I say bye to our team member, letting her know I will follow up as soon as I hear something, I see his response. Thank you to the team for making it easier for me to assist our employees during difficult times.
Chelsea Antczak
Chelsea Antczak
17:54 02 Apr 25
New City Insurance is an outstanding company that genuinely prioritizes its clients. They are professional, highly knowledgeable, and always delivers the best solutions. I highly recommend them to anyone seeking a trusted insurance advisor who truly has your back.
Stephanie Gillon
Stephanie Gillon
19:16 22 Mar 25
I'm here to tell the world to look no further in your insurance search! Seriously, this company is it. I am beyond impressed with the skill set of this team. They are extremely motivated and dedicated to helping their clients and offer top-tier service. I was treated with such care and professionalism throughout our entire interaction together. Thank you, Eric and team, for being so thorough, kind, and efficient while helping me find the lowest prices possible!
Roshaun LaForce
Roshaun LaForce
23:06 20 Mar 25
New City Insurance has such a great team. They genuinely care about their clients and make the whole process easy!
Alec Remington
Alec Remington
00:54 20 Mar 25
A great team of hard workers. My experience with them has been nothing but positive. Highly recommended.
Morgan Ostrander
Morgan Ostrander
16:00 19 Mar 25
Great team to work with! They lowered our costs and have provided excellent service.
Zach Baker
Zach Baker
15:19 19 Mar 25
Eric and the team at New City Insurance are truly top-notch. It’s clear they genuinely care about their clients and work hard to provide the best service possible. Their integrity and dedication really set them apart. Highly recommend!
Momo Furusho
Momo Furusho
13:24 19 Mar 25
New City is run by not just a competent team, but people who genuinely care about providing the best service possible. Eric Calciano is a gem!
Allie B
Allie B
19:34 04 Feb 25
Excellent service and support from start to finish! The NCI team is professional, responsive and truly cares about their customers.
Deana Hartland
Deana Hartland
16:04 14 Jan 25
These guys are great and definitely go above and beyond. We were overcharged for a surgery that my husband had in Aug 2024 due to the contract that they had with our health insurance. It was very difficult trying to work and deal with trying to get this refund back from the surgical hospital we went to. A lot of playing phone tag with them. My husbands HR team got "Nicholas" involved and OMG.....he just handled everything. He stayed in constant contact with me via email on every step of the way. Eventually he was able to get this money refunded that was $997. He has been on top of it from day one. I must say he took all of the stress off of me dealing with this situation during my working hours and went ABOVE AND BEYOND the call of duty. I am so happy they got involved and relived me from dealing with this and the stress it would've caused me. You will be very blessed working with a company such as this. Keep doing what your doing!
Justin Hoffman
Justin Hoffman
02:52 17 Oct 24
Always quick to respond. This team is up early and late.
Roger
Roger
16:30 30 Aug 24
Eric Calciano, is as sharp and knowledgeable about health benefits and insurance, as anyone I've ever come across. If you need any kind of benefits analysis I highly recommend him and his firm. He is easy to work with and highly professional.
Timothy Burke
Timothy Burke
04:02 30 Aug 24
I don't leave reviews often, but this one is well deserved and overdue. Clayton provided services to my company prior to his move into the insurance world a few years ago. Always being incredibly impressed with his talent and strong communication skills, I decided to switch our insurance broker and give New City a shot. That turned out to be a great move.The first year, Clayton actually jumped on a plane and flew from Oregon to California just to be onsite and administer open enrollment for my 45 employees. Clayton, Eric, Jeff, Brendan, and the entire team have been a pleasure to work with over the years. The communication, response time, and insurance knowledge is second to none in my opinion. A legitimate 10/10. They are great listeners and strive to really understand the needs of their customers.I'm very selective about giving referrals and making recommendations, but New City has never disappointed. If you are reading these reviews to help make your decision on selecting an insurance broker, this team is 100% a solid option. And if you don't believe me, just look at the other reviews.
Megan Ketter
Megan Ketter
19:48 28 Aug 24
Excellent customer service. Brendan and team are professional, timely, and so appreciated when navigating this complicated insurance world. Very thankfully for them! Highly recommended.
Ailene Chow
Ailene Chow
23:15 26 Sep 23
We have been working with New City Insurance since 2019 at the start of our company and has not look back since. They are responsive and proactive when it comes to advise and also market analysis on what's there in the marketplace. Unfortunately insurance benefits costs has been increasing yearly with differences in the percentage of increase . The New City folks reaches out months before the impending increase takes places and help relook into options or recommendations that they see fit. We were a company of 2 to now 7 permanent staff . While we are small , this company still takes care of us well.
Carol Zhang
Carol Zhang
04:29 06 Mar 22
As a rapidly expanding national media organization, the employee benefits strategy and administration that New City has provided us during our growth has been invaluable. They have been proactive about informing us of the different benefit strategies available to us as we grow as well as managing the additional compliance laws and reporting requirements at each stage of our growth.
Claudia Villalobos
Claudia Villalobos
20:14 03 Mar 22
New City Insurance made navigating through all the health insurances super EASY. Their documents are highly informative, professional, and easy to work with. Thank you for making the process of choosing a health plan so simple. You guys are THE BEST!
Philippe Salas
Philippe Salas
17:02 22 Feb 22
I never expected to have a good time talking to an insurance salesman, but let me tell you Brendan was quite the treat. He was very helpful explaining the options and has a wonderful sense of humor. I hope to speak with him every time I call.
Jennifer Polito
Jennifer Polito
17:15 09 Feb 22
Super easy enrollment process. Fast and friendly customer service. If you are looking for an insurance company that is there for you every step of the way I highly recommend New City Insurance.
Rocky Salas
Rocky Salas
23:46 07 Jan 22
So friendly, I hope to speak to him again in all my future insurance needs.
Rocky Salas
Rocky Salas
23:38 07 Jan 22
So friendly and soft spoken. I hope to speak to him again in all my future insurance needs.
Jose Brena
Jose Brena
13:20 06 Jan 22
Eric Calciano has been extremely helpful in finding and selecting the right insurance coverage for our company. With many options out there Eric assisted us on getting a low cost provider saving more than 20% than from our competitors and providing excellent coverage for our employees.
Anastasia Beaverhousen
Anastasia Beaverhousen
17:05 28 Dec 21
Signing up for insurance was quick and easy. Felicity Sundsboe
SFCC
SFCC
22:08 29 Nov 21
Jeff Stoltey and his team provide excellent customer service. Jeff has always provided my company SFCC with straightforward options. I went to a larger insurance company only to RUN BACK to Jeff at New City Insurance. I recommend them to anyone needing insurance without hesitation.
Kevin Luby
Kevin Luby
19:13 22 Oct 21
Quick, easy & informative. We were able to secure quality insurance for our small business on a tight deadline. Thanks for the help New City.
Theresa Ruybol
Theresa Ruybol
19:30 01 Jul 21
Eric was so great with us. He was very patient and kind as we are a newer smaller organization who is growing rapidly. With that said, we had made our inquiry, he had great rapid response and mostly had to wait on me. Any request that we made and/or questions we had, he was great answering and helping us understand. Then when we were ready for all documents and to move forward, Brendan helped with getting that together and the two of them worked their magic on New City's end to notify me of what was needed, assist me in that process and confirming that all was complete and approved for the coverage. I just want to say thank you all again so much, as insurance has always been confusing to me, and you all made that process go a lot smoother.Thank you
Andrea Ordendorff
Andrea Ordendorff
21:06 07 May 21
I've been working with both Clayton and Brendan for well over a year. As the purchase of our dental practice was delayed well over 14 months they both patiently supported me and continued to make themselves available. When we were officially ready to sign up they made the whole process seamless and super easy. This team is highly knowledgeable, professional, supportive, and efficient! I can't thank them enough for everything they've done.
T W
T W
22:32 30 Aug 20
I love New City Insurance. I never had a good experience dealing with insurance brokers until I started working with Brendan. He’s awesome! He is patient with me and takes the time to answer all my questions. I’m very grateful for all his help and hard work!
Mary Jane Deyette
Mary Jane Deyette
00:57 11 May 20
Jeff Stoltey is so awesome...even thru my company had only two employees, he took the time each year to research and find the best plan for us. The only reason I am leaving New City Insurance is because we no longer have any employees. Thank you Jeff
Alma Ortiz
Alma Ortiz
22:25 23 Feb 20
Brendan was awesome! I couldn't figure out how to pick my plan and he returned my call on a weekend to help me. Outstansing service!
jessica kavanagh
jessica kavanagh
19:53 13 Feb 20
Brendan was so helpful I definitely recommend him if you’re in need of good help and getting it done promptly. Thankyou so much again.
Tricia DeYoung
Tricia DeYoung
19:49 13 Feb 20
I was very thankful I inquired about this info. with Brendan. He was very helpful so I understand the benefits available much better now. Thank you Brendan.
B Bayer
B Bayer
17:43 24 Sep 19
NCI handled almost everything from start to finish. Clayton and Brendan made the plans easy to understand and walked me through the application process. They got me my ID numbers before my cards arrived so that I could keep an appointment I had already scheduled. My last broker wouldn't have done that. 5 stars!
Jessica Lehr
Jessica Lehr
03:36 07 Jun 19
Our staff was interested in a health plan, but we didn't know how beneficial a solid employee benefits package would be for our business to expand. We'd lose prospective employees because they had more options for their medical insurance which was sometimes more valuable than more pay. The New City team was amazing and gave us as many affordable options as possible so that everyone had their needs met.
Mike McClay
Mike McClay
19:36 03 May 19
My employer uses New City as their insurance broker, and I'm always amazed when I call in for assistance by how knowledgeable and attentive their staff is with my requests. Their online benefits platform makes selecting insurance plans pretty darn easy. I would highly recommend their services.
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