Benefits Breakdown July 2024 | Virginia Employee Benefits Consultants

Report: Health Care Costs Are 254% Higher for Privately Insured Patients Than Those With Medicare

A new RAND report revealed that in 2022, private insurers paid hospitals an average of 254% more than what Medicare would have paid for the same services, a jump from 224% in 2020. The study found that 2022 prices for inpatient hospital facility services averaged 255% of Medicare prices, outpatient hospital facility services averaged 289% and associated professional services averaged 188%. The report also found a wide variation in prices by state. Some states (Arkansas, Iowa, Massachusetts, Michigan and Mississippi) had relative prices under 200% of Medicare, while others (California, Florida, Georgia, New York, South Carolina, West Virginia and Wisconsin) had prices above 300%.

Hospital spending accounts for 42% of total U.S. personal healthcare spending for privately insured individuals. Recent federal policies require hospitals to post prices for at least 300 “shoppable” services and insurers to post their full set of negotiated rates. However, the report noted that many hospitals have yet to comply with the policies, and insurer-posted data often contains duplicative information.

Hospitals account for the largest share of healthcare spending in the country. Studies like this RAND report can offer employers valuable information and important tools to help them be better-informed purchasers of healthcare services. Contact us for more employee benefits information.

Helping Employees Navigate Rising Health Care Costs

Employers continue to struggle with rising healthcare costs and providing employees with affordable and quality care options. Unfortunately, employers expect healthcare costs to increase significantly in 2024. Several industry reports revealed that employers anticipate healthcare costs to grow between 6.5% and 8.5% in 2024, the largest increase in more than a decade.

While some employers may pass increasing healthcare costs onto their employees, many employers will absorb most of the higher costs to remain attractive to top talent and retain their workforce. These employers are expected to embrace cost control initiatives, such as requiring prior authorization, utilizing disease management and adding nurse advice lines. Other strategies employers will likely implement to manage rising healthcare costs include implementing plan design initiatives (e.g., offering high deductible health plans and requiring spousal surcharges or carve-outs), offering telemedicine and price transparency tools, and utilizing center-of-excellence programs. Helping employees navigate rising healthcare costs is an ongoing process, but it’s essential that workers feel informed about medical expenses, benefits options and mitigation strategies. Reach out to us for additional guidance.

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