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How medical inflation is ensnaring big employers

A convergence of factors driving up health costs is threatening to make next year a very pricey one for big employers, forcing some to make difficult tradeoffs and eat some of the added expense.

The big picture: Rising medical costs combined with the anticipated end of COVID-19 government flexibilities and delayed care for non-COVID patients are creating a triple whammy for employers with few options to adjust, experts say.

  • As Caitlin Owens reported in September, seven in 10 employers expect moderate to significant increases in the cost of health benefits over the next three years.

What they're saying: "Employers are fed up, as they should be. They're footing the bill, along with Medicare and Medicaid, for everything," said Brian Miller, a scholar at the American Enterprise Institute and hospitalist at Johns Hopkins Hospital.

  • "Everyone is angry about drug costs. Well, yes. But that's 12% of costs," he said. "Hospitals and physician practices are 51% of health care expenditures ... We actually haven't really looked at that."

Driving the news: Employers have been able to shift some of the cost burden to workers through premium increases or high-deductible plans. But the tight labor market could provide an argument against that in the next two years.

  • A further complication is the forthcoming transition of the COVID response to the private sector, which will put health plans and patients on the hook for the cost of tests, vaccines and other treatments.

  • And the demise of Roe v. Wade is turning up the heat on employers to beef up their benefits, particularly in reproductive health, in order to stay competitive, Tammy Sun, CEO of Carrot Fertility, told Axios.

  • "It's put a lot more pressure on employers because employers are the delivery mechanisms of health care," Sun said. "They had to deal with COVID. Then they had to deal with the Great Resignation. Then they had to deal with the recession and are laying people off. And now they have to plug this other gap."

Between the lines: A divided Congress isn't likely to offer many policy fixes, with Republicans likely to focus on tax and budget issues and the Biden administration expected to use executive branch agencies to push its labor and employment agenda.




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