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In an environment of high inflation, health insurance costs are doing the opposite: they have started to deflate and are expected to continue to fall every month until the fall of 2023, economists predict.
Health insurance prices fell 4% in October and 4.3% in November, according to the consumer price index, a key measure of inflation.
By comparison, the average price of all US goods and services rose 0.4% and 0.1% in October and November, respectively.
Health data reflects factors such as consumer insurance premiums and benefits paid by insurers.
Health insurance costs had been rising steadily, in a range of around 1.5% to 3% per month since October 2021, according to CPI data.
Now, costs are expected to fall about 4% per month through September, said Jonathan Church, an economist at the Bureau of Labor Statistics, which publishes CPI data.
However, this deflationary dynamic may not match the actual financial experience of consumers with health insurance premiums. This drop in prices on paper is due to the unique way the BLS calculates health insurance inflation, economists said.
“That’s not a very good reflection of the prices consumers will see,” said Andrew Hunter, senior U.S. economist at Capital Economics.
Why health insurance prices are hard to quantify
Pandemic health trends have overturned inflation readings
At the start of the Covid-19 pandemic, consumers used less healthcare because they weren’t going to see doctors or go to hospitals for elective procedures. This translated into higher profits since insurers were still collecting premiums.
Now the economy has reopened and consumers are using their insurance more often. Aggregate earnings declined in 2021 compared to 2020 as insurers paid out more insurance benefits – and so monthly inflation readings turned negative.
“When we were in the middle of the pandemic and no one was getting elective surgeries, [insurers] were making a lot of money,” said Mark Zandi, chief economist at Moody’s Analytics. “But now they’re the opposite of that and people are using medical care services again.”
The BLS updates its earnings-related calculations once a year, in October.
As a result, the CPI for Health Insurance will remain negative until September 2023. There may be minor monthly fluctuations based on other inputs, such as the cost of hospital services, prescription drugs, materials and supplies. medical supplies, home health care and nursing homes, Church said.
The momentum is helping to temporarily hold up monthly inflation readings, economists said.
“It doesn’t change the main story that inflation is moderating,” Zandi said. “It just moderates that story to some extent.”
Consumers could see ‘higher increase’ in 2023 premiums
Since the CPI’s measure of health insurance inflation is not a direct measure of the financial impact on consumers, here’s what they can expect in 2023.
“As inflation continues to grow at relatively high levels, we could potentially see a higher average premium increase for 2023 than we’ve seen in recent years,” the Kaiser Family Foundation said of the statement. employer-sponsored health insurance in an October report.
U.S. employers expect their average health insurance costs per employee to rise 5.4% in 2023, following a 3.2% jump in 2022, according to Mercer.
Consumers who obtain workplace health insurance paid $1,327 in health premiums for individual coverage in 2022 and $6,106 for family coverage, KFF said. The level is similar to the 2021 amounts.
According to the Department of Health and Human Services, premiums for Affordable Care Act plans are expected to jump 4% on average in 2023.
It would be the first time in many years that ACA premiums have risen nationwide, with insurers citing rising prices and rebounding utilization for the bulk of the increase, KFF said. However, most consumers receive a subsidy for ACA premiums and are “largely protected” from the increase, KFF said.
The standard monthly premium for Medicare Part B is about $165 in 2023, down from about $170 in 2022, according to the Centers for Medicare and Medicaid Services. But the average monthly Medicare Part D premium for prescription drugs is estimated to be $43 next year, a 10% increase from 2022, KFF said.