(Bloomberg) -- Health insurance companies are set to raise prices next year faster than medical costs are increasing, according to some Wall Street analysts, adding pressure on US employers already facing severe inflation.
Benefits brokers expect rate increases of 6% to 12%, according to a survey conducted by BofA Global Research. Increases for employers will be higher than usual as inflation and labor expenses get priced into insurance premiums, analysts wrote.
While unexpected jumps in medical costs can hurt managed-care companies, they can benefit when they’re able to price for rising expenses, BofA’s Kevin Fischbeck and Michael Cherny wrote. The survey suggested positive momentum for companies including UnitedHealth Group Inc., Cigna Corp. and CVS Health Corp., they wrote. Despite the rate increases, BofA said “relative pricing” among insurers is competitive.
Insurers are taking a “historic and disciplined approach to pricing” with increases 1% to 2% above current medical-cost trends, SVB Securities analysts led by Whit Mayo wrote in a separate note Tuesday.
“Carriers are not chasing business,” but rather dropping less profitable clients in order to boost margins, he wrote, citing a call with an unnamed benefits consultant. With a tight labor market, employers are less willing to switch carriers and potentially disrupt workers’ benefits. This gives insurers more leverage.
UnitedHealth is scheduled to kick off earnings season for the sector when it reports third-quarter earnings Oct. 14.
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