First Inklings of Inflation Reach 2023 Health Cost Calculations

Anticipating inflationary pressures around healthcare costs, the IRS has spiked limits for 2023 on Health Savings Accounts (HSA) by 5.5 percent, much higher than the previous year’s rise of just 1.4 percent. These figures were released in April so payers can get the jump on rate-setting and employers can begin to plan their open enrollment periods.

The new calculations are:

• Self-only HSA contribution limits – $3,850, up from $3,650 in 2022
• Family HSA contribution limits – $7,750 up from $7,300 in 2022

The 2023 limits are intended to encourage employers during open enrollment to ease employees into HSAs and to boost employee dollar contributions. Employers are reportedly more interested in financing HSAs than before, especially for lower-paid employees.

More broadly, some of the cost drivers and variables for 2023 include the “table stakes” that employers add or expand mental health coverage to their offerings. Pandemic-related costs for treatment and testing are flattening, but there’s no predicting whether other COVID variants will emerge or whether a fall spike will occur as in previous years. Intuitively, it might seem that provider costs would rise across the board, but many are locked into multi-year arrangements and thus provider inflation trends usually lag the rest of the economy. For the segment of the provider/payer market up for contract renewal, negotiations are expected to be fierce – a major healthcare publication used the word “bloody” to describe the battles ahead.

Other uncertainties hang over the payer ecosystem, especially for possible Medicaid disenrollment and the potential end of pandemic-related subsidies for Affordable Care Act premiums. These effects of these shifts in the risk pool are hard to pinpoint but can draw employer-sponsored plans into inflationary patterns. Some states are requesting that payers submit rate approvals in two sets – one for the scenario in which Congress extends ACA subsidies set to expire at year-end and one in which it does not.

Other variables being mentioned by experts for 2023 are utilization patterns and cost-impacts or savings from telehealth, tweaks to the ACA “family glitch” and movement among small employers to self-funded or level-funded plans.

Employers should be looking now at their health plan options in anticipation of open enrollment this fall Their calculus is a difficult one, just as it is for payers.