Editor's Note: This story has been updated since it appreared in the print edition of the March 2025 issue to include a response from Anthem Blue Cross and Blue Shield in NH.
When the talk turns to the ever-rising cost of health insurance for businesses or individuals, a lot of finger-pointing goes on. Insurance companies say the hospitals are charging too much for their services. The hospitals say insurance companies are trying to enhance profits at their expense. The one thing hospitals and insurance companies agree on is that the rate of increase in the cost of prescription drugs is unsustainable.
Hospital charges, insurance company practices, and prescription drugs all have their role to play, with the average cost of employer-sponsored health coverage in the U.S. expected to increase anywhere between 5% and 9% year over year, depending on whose analysis you believe and the market you’re operating in.
The challenge of acquiring coverage for employees is also complicated by an ever-shifting landscape of providers and insurers as both jockey for the best position in negotiations.
Nowhere is that more obvious than in the highly publicized standoff between Anthem Blue Cross and Blue Shield in NH and St. Joseph Hospital that left thousands of Nashua teachers and municipal employees facing the prospect of finding new providers. The two parties, unable to reach a deal by Jan. 1, extended their negotiating deadline to March 15.
“Negotiations with hospitals have taken a toll on a lot of companies this year,” says Janice Karwacki, a licensed independent agent and owner of Health Care Benefits Solutions in Manchester. “Anthem can’t come to a deal with St. Joes. Humana almost didn’t come to a deal with Dartmouth-Hitchcock.”
At one point late last year, it looked like United Healthcare was not going to reach a deal with the for-profit HCA hospitals in the state, Parkland in Derry and Portsmouth Regional. The brinksmanship seems to be growing more extreme each year. “That’s kind of a big deal that it keeps coming to that standoff,”
says Karwacki.
Employers and employees trying to select coverage plans for 2025 are caught in the middle. “It causes a lot of anxiety for patients and families,” says Steve Ahnen, president of the NH Hospital Association. “I would hope the payers would not engage in the kind of brinksmanship we’ve seen play out around the country. I would hope that does not become the norm here in New Hampshire.”
Dueling Web Posts
Anthem declined requests for an interview, but a statement posted on their website puts all the blame on the hospital:
“Already one of the most expensive hospitals in New Hampshire, St. Joseph Hospital, owned by Massachusetts-based Covenant Health, is demanding to drastically increase the prices it charges patients covered by Anthem. This would mean much higher out-of-pocket costs for Anthem members. These higher costs would hit employers and their employees hard as well.”
St. Joseph responded with a post of its own, saying, “Publicly reported price information is posted on every hospital website. It is the law. Anthem has access to the same data that you do. St. Joseph Hospital is one of the most cost-effective healthcare organizations in Southern New Hampshire and yet, we are being characterized as ‘most expensive’ in statements from Anthem.”
Ahnen says Anthem has backed off from its claims about St. Joseph rates since being confronted with comparative data from hospital websites. “They know it’s not true and anyone can find out for themselves,” he says.
In a statement issued after the story went to print, Stephanie DuBois, a spokesperson for Anthem Blue Cross and Blue Shield in NH, stated, “That is inaccurate. St. Joseph Hospital’s current prices are 10 percent higher than the average cost at other New Hampshire hospitals, and St. Joseph is demanding even bigger price increases, which Granite Staters cannot afford.”
Jetta Darrow, a Nashua resident commenting on the Nashua Civic Sounding Board, a Facebook group focused on issues affecting Nashua residents, pointed out that these standoffs are usually settled at the 11th hour. “Negotiations are still ongoing, and dates can be extended. Hang tight. I don’t think either side can financially afford to lose the other.”
As predicted, both sides reached a settlement on Jan. 24.
Other Cost Factors
Hardball negotiations between health care providers and insurance companies are far from the only factor affecting the health insurance landscape.
The consulting and analytics firm Mercer recently released the results of its 2024 National Survey of Employer-Sponsored Health Plans. According to an analysis of responses from over 1,800 U.S. employers, total health benefit cost per employee is expected to rise 5.8% on average in 2025, even after accounting for planned cost-reduction measures.
Employers estimated that their costs would rise by about 7% on average if they took no action to lower costs. According to the survey, smaller employers (those with 50 to 499 employees) will be hit the hardest. Mercer projected costs will rise by about 9% on average absent any action to lower costs, and that, on average, employees will pay 21% of premiums through paycheck deductions in 2025, the same as in 2024.
“Based on these projections, 2025 would be the third consecutive year of health benefit cost increases above 5%, following a decade of cost increases averaging only around 3%,” according to Mercer. “Meanwhile, general inflation has cooled, suggesting that other factors are contributing to the higher health benefit cost trend.”
Expenses Climbing
One of those factors is certainly higher heath care costs or provider charges, which are projected to increase by 8% next year, the largest increase since 2012 according to the latest data from the Price Waterhouse Cooper Health Research Institute.
“We have seen expenses climb very significantly over the last few years,” says Ahnen. Nurse vacancies have been a big problem because replacing them with contracted traveling nurses is expensive but necessary. “We had about a 20% vacancy rate for nurses during the pandemic,” he says of NH’s hospitals. “Now it’s down to 12 or 14 % but still higher than it’s ever been.”
Put that on top of general inflation and pressure on wages across the board, and “the 23 not-for-profit hospitals in the state have a negative point [0.4%] operating margin, and that average masks some hospitals that are much worse,” Ahnen says.
Lower rates of payment from Medicare and Medicaid put pressure on hospitals to get more out of commercial insurers in the private market, which also contributes to rising commercial rates.
Rising commercial insurance costs is not a new story, says Max Hakanson of Advisory Board, a healthcare research firm. “But what has changed is these cost increases are no longer maintaining the predictable, steady climb employers had grown accustomed to. Since 2020, employers’ healthcare costs have fluctuated at staggering rates.” (See chart on page 26.)
Other factors pushing up costs include increased utilization by an aging population, unforeseen events like the shortage of IV solution caused by storm damage to a major production facility; and costly prescription drugs as gene and cellular therapies reach the market.
America’s Health Insurance Plans, the trade organization representing insurance companies, puts much of the blame on prescription drug costs and a lack of competition in the pharmaceutical industry. While declining to participate in an interview, the organization provided data that shows drug and hospital costs account for nearly two-thirds of every premium dollar
(see illustration on page 25).
Adding to the rise in premiums is growing demand for high-cost GLP-1 drugs like Ozempic and Wegovey, which were originally prescribed only for Type 2 diabetes but are being more widely used for weight loss. GLP-1 prescriptions quadrupled from 2021 to 2023, according to Price Waterhouse, while the cost of the drug rose dramatically.
Find a Good Agent
Given the wide range of options and cost factors, most businesses work with an independent agent like Karwacki, who can help them choose from the wide array of options, including, in some cases, a blend of private and government programs.
In a large business where most people make $60,000 or more, a conventional group plan probably makes the most sense. But smaller businesses with lower paid employees may find that premium subsidies are available on the ACA marketplace.
“A restaurant may have the owner, manager and cooks all on a group plan, but have the waitresses and hostesses work with me to get ACA plans because they qualify for a subsidy,” says Karwacki. “Some hotels do the same thing. Owners and managers are in the group plan, and the lower-paid employees on the ACA because they qualify.”
Ahnen, who represents the hospitals in the state, says payers and providers must find a way to “pull in the same direction.”
“Right now the payers seem to be pushing in the opposite direction,” he says, “which is costing providers more and ultimately ends up costing the employers, who are paying those premiums, more.”
A low-Cost State
Despite the payer-provider tug of war and all the other factors pushing up prices, Granite State residents can take some solace in the fact that it’s a lot worse in other parts of the country.
New Hampshire is one of only 19 states with a waiver from the federal government on certain requirements of the ACA. In NH’s case, the so-called 1332 waiver allows a reinsurance program that reduces risk to the primary insurance company. The state Insurance Department estimates that statewide average premiums are about 11.4% lower than they would be without the waiver.
New Hampshire has a relatively healthy population compared to larger states with more diverse populations and urban areas. Lower healthcare utilization rates help keep costs down.
According to a year-ending survey by Lending Tree, the most expensive states for health insurance in 2025 are going to be Vermont, Alaska, and New York, where premiums will be 86%, 75% and 67% above the national average. New Hampshire, Maryland, and Virginia will have the cheapest health insurance premiums, 32% to 40% below the national average.
That may not reflect everyone’s personal situation, because as Karwacki says, “There are way too many choices to generalize.”
