The cost of healthcare, including health insurance premiums, is typically a significant portion of household budgets. Budgeting for this necessary expense can be challenging as many wonder how affordable healthcare will likely be in the coming year.
As 2024 unfolds, many U.S. employers and households are bracing for substantial increases in healthcare costs. The year could bring one of the largest health insurance premium spikes in a decade if recent trends continue. On the heels of a 7% jump in 2023, experts predict costs could spike by another 6.6% this year.
Examine some key statistics and important trends to see how this may impact your budgeting for the year as we look at what may be in store for healthcare affordability in 2024.
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2024 Healthcare Cost Trends
Several factors are driving the rise in healthcare costs, including:
- Uptick in medical inflation
- Increase in demand for costly new treatments like weight loss drugs and gene therapies
At the same time, proposed governmental policies, such as increased access to telehealth services and changes in reimbursement structures, may help temper predicted increases. Take a look at some of the key trends to keep an eye on as the year goes on.
Employer-Sponsored Health Insurance Premiums to Rise
Employer-provided health insurance costs are predicted to jump from 5.4% in 2023 to 8.5% in 2024. However, a recent survey found that over 66% of employers plan to protect their staff from the financial impact by partially or fully absorbing the extra expense.
Other research predicts that employees purchasing private health insurance through their jobs may still see a 6% to 6.4% increase in premium costs this year — a significant jump from the past decade’s 3% to 4% annual average increase.
Healthcare Costs Rising to Match Overall Inflation
According to recent reports, underlying medical costs in the U.S. may increase by another 9% this year. Insurance providers cite the impact of lapsed preventative care during the COVID-19 pandemic and over-treatment by healthcare providers as factors in this rise.
In recent years, there has been a disconnect between overall inflation rates in the United States and the inflation of healthcare costs. Following a peak of 9.1% in June 2022, the U.S. inflation rate has declined to just 3.1% for the 12 months ending in January 2024.
At the same time, the cost of health insurance decreased by 27% in 2023, even as the cost of medical supplies and prescription drugs increased significantly. This disconnect occurred because financial contracts between healthcare providers and insurance companies are typically negotiated for several years, creating a lag in premium adjustments. However, the reckoning has finally arrived, and private health insurance costs are catching up.
The Real-World Rise in Healthcare Costs
While the predicted percentage increases may seem relatively small, when applied to the already substantial cost of health insurance, they can translate into significant cost hikes for both employers and families.
The average annual health insurance premium for a single person is about $8,500, while family coverage runs about $24,000 per year. In real dollar terms, a 6.5% increase translates to about $550 a year for an individual and $1,500 for family coverage.
The good news is that employers typically cover the bulk of the premium cost — around 83% on average for individuals and 71% for family coverage, leaving employees to cover the remaining 17% and 29%, respectively. In this case, individuals could expect an increase of about $93 per year, while families could see a jump of about $452.
While actual dollar amounts may vary, many Americans will likely feel the pinch of increasing healthcare costs in 2024 and beyond.
Strategies for Managing Healthcare Costs
With medical costs predicted to continue upward, it’s essential to take proactive measures to curb healthcare spending where possible. This may include re-evaluating your coverage options, modifying your current coverage, and proactively managing your prescription drug costs.
Review Your Insurance Options
If your employer offers group health insurance, carefully reviewing the available options could help you identify plans with cost-saving features, such as lower premiums, lower out-of-pocket costs, or higher health savings account (HSA) employer contributions. Reviewing your options on the Health Insurance Marketplace may also help you lock in a plan that aligns with your budget and healthcare needs.
You can purchase or make changes to plans on the Marketplace during the open enrollment period, which runs from Nov. 1 through Jan. 15 each year. For employer group plans, the enrollment periods may vary.
You may also be eligible to enroll outside of the Open Enrollment Period if you’ve had a qualifying life event, such as getting married, having a child, or losing your current coverage.
Consider Raising Deductibles and Out-of-Pocket Maximums
Choosing a plan with a higher deductible or out-of-pocket (OOP) maximum typically results in lower premiums. However, it’s important to evaluate your ability to cover the higher upfront payments if an accident or illness occurs. Otherwise, the change could risk your financial stability.
Consider an HSA or FSA
Many employers offer HSAs or flexible spending accounts (FSAs), which allow you to set aside pre-tax money for out-of-pocket medical expenses. This can help you reduce your taxable income while also building savings to cover your costs on a tax-free basis.
Although FSAs can pair with any type of health insurance plan, HSAs must be paired with a high-deductible health plan (HDHP). In 2024, a qualifying plan must have at least a $1,600 deductible for individuals or a $3,200 deductible for family coverage. HDHPs also have a maximum 2024 out-of-pocket cost of $8,050 for individuals and $16,100 for families.
Explore Ways to Save Money on Medications
With the cost of about 600 medications already seeing price hikes in January 2024, looking for opportunities to reduce spending on prescription drugs may help lower healthcare spending. Consider the following options:
- Discuss alternatives with your doctor: Ask if a lower-cost generic version is available or a less expensive drug that treats the same condition.
- Comparison shop for medications: Compare the cost of each prescription across nearby pharmacies, including chains and independent stores.
- Explore manufacturer savings programs: Major drug makers may offer coupons or rebates if you meet income or insurance coverage requirements. Check the company’s website for details.
- Consider mail-order programs: A mail-order pharmacy may offer a better per-pill price point and provide 90-day supplies with home delivery.
The Bottom Line
With the costs of healthcare and health insurance premiums poised to increase in 2024, many people may need help managing their healthcare budgets. However, taking proactive steps can help reduce the impact of rising premiums and out-of-pocket expenses.
As you compare your available coverage options and consider potential cost-cutting strategies, consulting with an insurance professional or financial advisor who can help you choose a plan that balances your financial and healthcare needs may be helpful.