Health Care Costs Rising
‘Tis the season when many of us are shopping to find just the right thing for our families. Yes, it is beginning to look a lot like open enrollment.
This annual event is when many workers decide what coverage they want in their employer’s health plans.
If you have already selected your coverage, you will have noticed an increase in healthcare costs. Next year, you are likely to see another hike in premiums.
And Rising
Health Care costs have risen 6.5 percent over the last year, according to the U. S. Bureau of Labor Statistics. As a result, AON, a financial services research firm, expects employer insurance costs will increase another 6.5 percent next year.
While the 2023 jump in U.S. healthcare benefit costs is significant, it could be worse. A Willis Tower Watson (WTW) survey found the next lowest increase in Europe at 8.6 percent. The highest increase is expected in Latin America at 18.9 percent.
According to the WTW survey, 54 percent of employers polled expect their 2022 healthcare costs will be over budget.
Usual Suspects
When looking for causes of rising healthcare costs, two familiar culprits appear.
During the pandemic, many people restricted spending – including healthcare. Conversely, with the return to normal, a pent-up demand for treatment has been unleashed. That means more treatment and more expense. RCM companies (revenue cycle management) are also experiencing growth as the prices increase.
“Medical claims were suppressed for most employers during the first year of the COVID-19 pandemic,” notes the AON report, “during which time much care was postponed or skipped during quarantines. Employers have seen the medical claims experience return to more typical levels of growth and anticipate inflationary cost pressures in the coming year.”
Back To The Doctor’s Office
About half of Americans put off medical care during the pandemic, according to a KFF tracking poll. However, now patients are returning to hospitals and doctor’s offices in droves. A McKinsey poll of hospital officials found patient levels are getting back to pre-pandemic numbers.
McKinsey also found that costs of supplies, equipment, and drugs are increasing along with labor costs.
Conclusion
So, what can you do to keep your medical bills down?
Avoiding treatment is not a smart move. Some conditions are hereditary. However, there are preventive maintenance practices we can all take to better our health and keep medical expenses down.
You know the drill – eat right, exercise, and get plenty of sleep. To help with all that, see your doctor on a regular basis. And, no, that is not an expense. It is an investment that will save you money in the long run.
Construction Posts Gain
With the housing market taking a big hit from mortgage rate hikes, you might expect the construction industry to be in a decline. You would be wrong, says the U. S. Census Bureau.
Construction spending bounced back from an August decline of .6 percent to post a .2 percent gain in September. That amounts to a 10.9 percent increase year-over-year, according to the Census Bureau report.
Non-Residential Construction
Work on non-residential structures accounted for the increase in construction spending.
Spending on private construction increased by .4 percent. State and local government spending on construction rose by .6 percent.
Residential Building Level
Construction of single-family housing remained unchanged, according to the report.
Single-family construction and housing sales have taken a hit from rising mortgage rates. The average 30-year fixed-rate mortgage is 7.32 percent as of Friday, according to Bankrate.
Fed Rate Hikes Impact On You
Another day, another rate hike by the Federal Reserve Bank. Wednesday the Fed made a .75 percent rise in the prime rate. That is the sixth rate increase this year.
The prime rate is the interest commercial banks charge their top customers. For you and me, it is the basis banks and other lenders use to set rates for loans, credit card interest, and personal lines of credit. It is also used to determine interest on fixed investments, such as certificates of deposit, money markets, and savings accounts.
Why Are They Doing This To Me
The Fed is raising rates to try and beat down inflation. The thinking goes that higher lending rates will reduce consumer spending, lowering demand for goods and services. That, in turn, will reduce inflation.
However, the impact of a rate hike on inflation is not immediate. That can lead to consumer pain as interest on credit cards and other debt can go up while prices are still high
As a result, this might be a good time to look at how the current rate hike affects you.
Credit Cards
It may take a billing cycle or two to see a change in your credit card interest rate.
Certain cards require a 45-day notice before raising the rate. However, the variable APR on cards can change at any time without notice.
To keep credit card interest under control, it is best to pay off your balance each month.
Borrowing
“Borrowing costs tend to increase first after a Fed rate hike,” Liz Ewing, chief financial officer of Marcus by Goldman Sachs, told Bankrate. “Banks are not required to line up their interest rates with the Fed’s rate, so each bank will respond to the Fed’s rate announcement and adjust rates in their own way.”
If you are buying a home, your mortgage rate will rise. In addition, home equity and HELOC loans will go higher.
Car loans and personal loans will also cost more.
In addition to consumers, businesses are impacted by the rate hike. As a result, prices of goods and services may rise just in time for the holidays.
Fixed Rate Investments
The good news about the rate hike is that certain investments will pay more.
Money market and savings accounts as well as Certificates of Deposit will continue to raise those rates.
Stocks
If you own stocks, you have already seen the impact of Fed policy on the markets. Generally, when the Fed increases rates stock values go down. With the exception of a few brief rallies, that has been the case this year.
Conclusion
We do not have a say in Fed policy. However, there are a few things we can do to deal with rising interest rates.
- Eliminating debt will put more money in your pocket by eliminating interest paid on loans,
- Pay off credit card balances every month.
- Put spare cash in a liquid fixed-rate account, such as a money market or savings account.
Read More:
Breaking: Fed Rate Hikes May Put Your Job At Risk
4 Financial Minimalism Tips to Simplify Your Life
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Max K. Erkiletian began writing for newspapers while still in high school. He went on to become an award-winning journalist and co-founder of the print magazine Free Bird. He has written for a wide range of regional and national publications as well as many on-line publications. That has afforded him the opportunity to interview a variety of prominent figures from former Chairman of the Federal Reserve Bank Paul Volker to Blues musicians Muddy Waters and B. B. King. Max lives in Springfield, MO with his wife Karen and their cat – Pudge. He spends as much time as possible with his kids, grandchildren, and great-grandchildren.
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