- Healthcare insurers could get a slight respite from rising medical costs next year. Global costs are expected to rise 9.9% year over year in 2024, down from a 10.7% increase in 2023, according to a new survey from consultancy WTW released on Tuesday.
- However, that decline might not last long. Nearly three-fifths of insurers surveyed anticipate higher medical cost growth over the next three years as new medical technologies, overuse of care and members’ poor health habits drive increased spend.
- Many insurers told WTW they are leaning on deductibles, contracted provider networks and telehealth options to manage costs. Others are excluding coverage for healthcare such as fertility treatments or gender re-affirming care.
Global medical cost trend rates soared from a 7.4% year-over-year cost increase in 2022 to almost 11% this year, driven by inflation and the cost of providing elective procedures that were delayed during the COVID-19 pandemic, WTW found.
While inflation has begun to ease and a surge in elective procedures has stabilized, the report said new stressors like pricey medical technologies and ongoing geopolitical conflicts could drive up medical costs in the coming years.
“While some cost increases are projected to ease in 2024, they remain at significantly high levels,” Linda Pham, WTW’s senior director of integrated & global solutions, said in a statement.
Nearly 60% of global insurers surveyed said medical professionals recommend too many health services or overprescribe, leading to increased cost. Fifty-seven percent said the growing use of new medical technologies, such as artificial intelligence-powered diagnostic tools, is driving up medical costs.
Over a third of insurers surveyed blamed providers for rising medical costs. Providers and payers frequently butt heads over health costs, with providers claiming insurers inappropriately deny claims. Meanwhile, insurers accuse providers of over-billing to balance books.
Insurers are split about what services to cover as they eye rising costs. In the U.S., insurers expressed concerns about pharmacy spend.
Interest has grown over the past year in new weight loss drugs, such as GLP-1 agonists, but insurers are split on whether and how to cover them. Insurers also differ on whether to cover costs from drug and alcohol abuse treatments, HIV/AIDS medications, fertility treatments and gender-affirming care.
“Employers are facing both higher cost increases as well as the potential for significant volatility, making it even more difficult to budget and plan,” Debby Moorman, WTW’s North American head of health & benefits, said in a statement.
Insurers are less split on whether to cover well-being services that are designed to promote healthy behaviors and preventative care. In 2023, 54% of insurers added well-being services to their portfolios, noting that lifestyle choices contributed to increased medical spend.
However, researchers noted the programs do not always pay off. Though many insurers view well-being services as “free ‘value-adds’ to healthcare programs,” they can often appear as duplicative benefits within a package, the report said.