Health Insurance and Medical Costs Are Set to Surge Again in 2024
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As open enrollment season officially comes to an end, folks with private health insurance — especially through their job — could be in for some sticker shock.
Costs for workplace health plans in 2024 are expected to spike over 6%, according to recent surveys from consulting firms Mercer and Willis Towers Watson (abbreviated WTW). A jump of that size amounts to one of the biggest increases in a decade and follows a major increase in health care costs in 2023.
Mercer’s survey found that health plan costs could jump by 6.6% this year, assuming employers make no cost-cutting changes to their current plans. And even if they do take steps to cut costs, the increase is expected to be 5.4% on average. Similarly, in survey results shared with Money in September, WTW found that health insurance costs are expected to rise between 6% and 6.4%.
According to Mercer, typical annual price increases have hovered between 3% and 4% for more than a decade, making 2024's estimated hikes particularly steep.
The expected price increase compounds with a "nasty" 7% jump in health care costs that employees already faced in 2023, according to a separate measure by the nonprofit Kaiser Family Foundation (KFF).
Inflation has finally caught up to health insurance
Perhaps surprisingly, private health insurance is one area inflation has yet to fully reach. In fact, data from the Labor Department puts health insurance costs in a period of deflation — meaning that prices have gone down. For the year ending in December 2023, overall health insurance costs fell 27%, even as the cost of prescription drugs and other medical supplies jumped.
Why the disconnect? Experts say that hospitals and other health care providers have been dealing with elevated prices all along, but those price increases didn’t immediately seep through to health insurance because financial contracts are often negotiated every few years. Now, private insurance prices are finally catching up.
What's more, those underlying medical costs are primed to keep climbing. A separate report by WTW, released in November, found that insurers said they expect medical costs to increase by about 9% in the U.S. this year. Insurers cited forgone preventive care throughout the pandemic, expensive new drugs and over-treatment by providers as reasons for the upward march.
The outlook for 2024 health insurance prices
After seeing double-digit price increases on all kinds of products in recent years, shell-shocked consumers might not think a 6.5% price hike sounds all that bad. But health insurance plans tend to be extremely expensive: On average, they cost about $8,500 for singles and $24,000 for families, according to KFF. Assuming the projections are accurate, that means the cost of those health plans will jump this year by about $550 and $1,500, respectively.
The good news is that — in theory — you won’t have to foot the entire increase yourself. Employers typically split the cost of health insurance with their employees, with a portion of the cost deducted from each paycheck in the form of a premium.
Exactly how much of this overall increase in cost for health plans will come out of your pocket depends on how your employer plans on dealing with the elevated prices. Additionally, employer size tends to play a major role in how much a company contributes to a worker’s health plan, KFF says.
In 2023, KFF found that employers generally covered 83% of the cost of annual premiums for singles, leaving 17% to their workers. For family coverage, employers covered less — 71%. However, workers at companies with fewer than 200 employees typically had to spend more out of pocket. For family plans, as an example, small companies typically paid only 62% of the premium.
Other factors such as industry, region and the type of health plan may also play a part in how much you’re ultimately on the hook for. Across the board, though, you can prepare to pay more for health coverage this year.
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