Cost Increases Causing Strain on Plans
Local health insurance has been in a state of flux over the last 12 to 18 months and heading into January of 2025, we do not see any immediate relief on the horizon. The trends being seen statewide and at the GIC, as observed (see page 15) by the Health Policy Commission, are also being seen at the municipal level.
Increases in utilization of specialty drugs, utilization of services including inpatient and outpatient hospitalization and consolidation of primary care practices under hospital umbrellas or practices leaving the market altogether are resulting in increased costs being charged by these systems, thereby causing a strain on municipal plans.
While we are sure that the increased health care cost trends will impact non-Medicare plans in the coming year, we do not know to what extent. However, for those covered by a Medicare supplemental plan or a Medicare Advantage plan offered by their municipality, the impact has already been realized for the January 1, 2025, plan year. Those renewing then or around there absorbed premium increases between 9% to as high as 20% on the supplemental plans, with some Medicare Advantage plans coming in at approximately 30%.
However, we already know the negative result of measures such as higher premiums and potential increased cost sharing have, namely members forgoing seeking care.
The cost trends referenced above combined with changes by the Centers for Medicare and Medicaid Services (CMS) and the Inflation Reduction Act (IRA) have led to the increases for the group Medicare plans for 2025.
The IRA included the implementation of rate caps on particular types of drug plans, the implementation of an out-of-pocket max of $2,000 and a smoothing program which provides additional protection for retirees. However, if you squeeze a balloon in one place it is going to expand in another, and this is what we are seeing with the recent rates.
Municipal budgets were already retracting and when faced with mid-year budget increases such as these, health insurance becomes the first place reviewed to make reductions. We have a growing concern that these increases will lead to a potential for narrowing of networks, increased cost sharing, changes to formularies to reclassify some drugs to a higher copay or cut them out altogether or increases in premium splits.
However, we already know the negative result of measures such as higher premiums and potential increased cost sharing have, namely members forgoing seeking care. The longer someone forgoes seeking medical care, especially for chronic conditions, the higher the cost in the long term. We can’t afford shortsighted, knee-jerk solutions.
Your municipality may provide your benefits through a joint purchasing arrangement (JPA), which is a consortium of municipalities and school districts or other governmental units that purchase benefits for their retirees and employees. JPAs are not immune from the impact of the increases. Some have the ability to provide stability across their communities while others have been teetering on the edge. Prolonged increases could push them closer to dissolution. Continued monitoring and communication will be critical.
The Association continues to work closely with our partners in labor to develop strategy and share information. This is only made possible because our membership is engaged and informed.