Rising Health Insurance Premiums Affecting Long Island Workers

Rich Michaels Jr. has been covering the health insurance premiums for his employees at Purcell Management Auditing and Consulting Co., based in Farmingdale, for the past 27 years. He’s committed to this but, for the first time, he’s contemplating introducing co-pays for his eight workers due to rising costs.

“We’ve been looking into various interest rates,” he mentioned, hinting at the challenges ahead.

On Long Island, both employees and employers are facing significant premium hikes, with some experiencing increases in the double digits as new health insurance plans roll out this month.

According to projections from over 1,700 employers shared by the National Security Agency in September, Michaels’ company is seeing premium increases similar to the anticipated average of 6.5% for employee health benefits nationwide. Sunit Patel, a principal accountant at Mercer, explained that employers often adjust employee premiums by the same rate as the cost increase. The survey suggested some employers expect hikes of 10% or more, while a few are holding the line on increases.

Key Findings from Recent Reports

• Open Enrollment Impact: Long Island residents and businesses are facing premium hikes as numerous health insurance plans raise their rates this month.
• Average Increase Rate: Nationally, employer-sponsored plans are estimated to increase by 6.5%, with New York small group plans seeing a 13% rise and Medicare Part B premiums increasing by 11.6%.
• Expert Opinions: Factors contributing to rising healthcare costs include weight-loss drugs, advances in medicine, hospital consolidations, an aging population, and growing chronic disease rates.

Many employers surveyed expressed plans to make “cost-saving changes” to their plans, like increasing co-pays and deductibles to manage rising benefit costs. Some businesses are even cutting back on coverage for popular yet costly weight-loss medications.

Recent analysis indicates that businesses in New York with fewer than 100 employees saw an average increase of 13% in small group plans—marking the most significant jump in a decade. In contrast, individual-based plans increased about 7.1%. The increase for state-regulated plans was approved by the Department of Financial Services, which pointed out that these hikes were generally much lower than the requests from insurers.

Projected increases for Medicare Part B premiums stand at 11.6%. As enhanced government subsidies from 2021 are set to expire at the end of December, some individuals enrolled in the Affordable Care Act may face substantial premium hikes. There’s also an ongoing debate among Democrats about extending these subsidies, which is complicating matters with the potential federal government shutdown looming.

The surge in premiums can be largely attributed to consistent increases in medical costs that frequently outstrip inflation. Between 2000 and 2024, medical expenses surged by 121%, whereas the cost of consumer goods rose by 86%, according to analysis from the health policy nonprofit KFF.

So, what’s driving these costs for Long Islanders?

Weight-Loss Drugs

Millions of Americans are now eligible for treatment with GLP-1 drugs like Wegovy and Mounjaro, approved for weight-loss and diabetes treatment, respectively. Many companies typically cover the costs for diabetes, but the price tags for these drugs can reach over $1,000 a month. A report forecasts that by 2025, nearly 20% of larger companies will cover weight-loss drugs. Despite their benefits, some employers are calling for cuts to weight-loss drug coverage due to the high costs.

Advancements in Medicine

Medical advancements, while beneficial for health outcomes, have also resulted in heightened costs. Patel pointed to rising expenditures on gene and cell therapies, some of which cost hundreds of thousands, if not millions, of dollars per treatment.

Aging Population

As the population ages across Long Island and beyond, the increase in individuals requiring medical care, especially those with chronic diseases, is leading to higher costs. Wendy Darwell, from the New York State Suburban Hospital Alliance, noted that these patients often need more complex care, leading to longer hospital stays and increased emergency room visits.

New York’s High Medical Costs

New York state has the highest average annual premiums for employer-based insurance in the nation for 2024, averaging $9,589 for individual plans. This rate notably exceeds the national average of $8,486 and includes contributions from both employers and employees.

“Health insurance premiums are closely linked to the basic costs of healthcare,” explained Leslie Moran from the New York Health Plan Association. “As healthcare costs rise, premiums are impacted.” Research also highlights that New York has the eighth-highest inpatient and outpatient costs in the country.

Darwell pointed out the many expenses of doing business in New York, like high labor, real estate, and energy costs.

Bill Hammond, a senior health policy fellow at the Empire Public Policy Center, added that health taxes on services and insurance are among the highest in the US, compounded by numerous mandates requiring coverage for certain procedures and limits on patient co-pays.

High Costs in the U.S.

America’s healthcare system remains the most costly globally, yet it lags in life expectancy compared to other wealthy nations. Multiple studies show the U.S. has a higher rate of preventable and treatable deaths. A key reason appears to be the more stringent regulation of healthcare prices in other countries compared to the U.S.

Hospital Consolidation and Insurance Revenue

Hospital consolidations are prevalent across the nation, including Long Island, leading to larger health systems demanding higher reimbursement rates from insurers. This trend often results in increased costs, as noted by Moran.

Darwell emphasized that while all hospitals in New York are nonprofit and consolidated for better negotiation power, they remain significantly smaller than major profit-driven insurance companies.

With most patients covered by Medicare or Medicaid, and many uninsured receiving care for free or at a discount, hospitals often lose money on these patients. Darwell explained that they must seek higher reimbursement rates from commercial insurance plans to sustain operations.

If enhanced ACA subsidies are not renewed, more individuals might drop their insurance, resulting in an increased number of uninsured individuals relying on free hospital care. This scenario might lead younger, healthier individuals to decide that maintaining insurance isn’t worth the cost, potentially driving up overall insurance costs.

Average Health Insurance Premium Increases

• 6% to 7%: Anticipated premium increases for workers in employer-based plans.
• 13%: State-approved increase for roughly 700,000 New Yorkers under small group plans.
• 7.1%: Expected increase for individuals purchasing insurance under the Affordable Care Act.
• 11.6%: Projected increase for Medicare beneficiaries’ standard monthly premiums.