Source: Denver Business Journal
To explain the near fallouts between health care providers and insurance carriers in Colorado this year, Courtney Hutchison tells her clients to imagine asking for a raise.
“If you haven’t received a raise in a decade, you’re going to ask for a pretty big one, because it might be another decade before you get the next one,” said Hutchison, Colorado market president for insurance agency the MJ Companies.
Contract renegotiations like the one that stalled in September between HCA HealthOne and United Healthcare often go unnoticed. But those businesses, like many around the county, are under mounting financial pressure.
Agreements with health insurers often last for several years — even a decade — so health systems are aiming now to make up for the losses they sustained during the pandemic and to win financial security for future years, Hutchison said.
Those multiyear contract renegotiations are part of the reason why medical costs tend to trail general inflation, health industry experts say. The contracts and other factors are showing up this open enrollment season, increasing health insurance costs for many Colorado employers.
A Mercer survey conducted in September estimated the total health benefit cost per employee will rise 5.8% on average in 2025. Without taking any action to cut costs, Mercer said employers should expect a rise of 7%.
Willis Towers Watson places the average cost of medical and pharmacy services at a near 8% rise for 2025. The increases would follow low, or even negative, rate increases during the pandemic; increases averaged 3% annually over the last decade, according to Mercer.
For the first time in years, Hutchison has seen baseline rate increases for some employers reach double-digits, jumping as much as 12%, she said.
“We are entering a period of high health care inflation and projected cost increases,” Hutchison said.
Michael Halford, a Denver-based principal and consulting actuary for the global firm Milliman, expects higher rate increases to stick around for several years as contracts continue to come up for renewal, he said. However, he said, a new normal of higher rates would be unsustainable for the larger health care ecosystem.
In addition to contract renegotiations, drug costs are playing an outsized role in the rise of health care costs overall, Halford said. In Milliman’s 2024 study, prescription drug costs rose 13%, he said.
That increase mostly stems from the use of high-cost pharmaceuticals — GLP-1 weight loss drugs like Ozempic and high-cost cancer treatments, Hutchison said. MJ’s client base has seen a rise in cancer incidents mostly because of more effective early detection, she said.
