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Financial Planning

Healthcare Costs Are Projected to Rise 6.5% in 2022: Here’s What It Means for You

Rebecca Griffith

Why It Matters:

  • An annual report by PricewaterhouseCoopers (PwC) is projecting an overall increase in medical costs of 6.5% in 2022.1
  • The “COVID-19 hangover” is a factor, with an expected increase in healthcare usage in 2022, as well as worsening health overall because of the pandemic.1
  • Other factors in the increase include increased substance use and mental health issues, the ongoing costs of treatment of the virus, and investments that are being made by the medical industry.2

There’s been a lot of talk in the past few months about the “COVID-19 hangover.” It generally refers to the lingering effects of COVID-19 on our daily lives — from supply chain issues to labor shortages to a rise in inflation.  

Even the healthcare industry is using the term, which loosely refers to an expected increase in healthcare use and spending in 2022 due to COVID-19. Some of these “hangover” effects include increased healthcare usage since many postponed their care earlier in the pandemic, increased substance use and mental health issues, worsening population health, the ongoing costs of treating the virus, and investments that are being made by the medical industry.2

So, what can we expect next year? Well… it depends on who you ask and whether you’re an employer or employee. An annual report by PricewaterhouseCoopers (PwC) is projecting an overall increase in medical costs of 6.5% in 2022.1 Some employers expect their group health plan premiums to increase, on average, around 5 percent.And as for employee medical costs, according to the Segal Health Plan Cost Trend Survey, per-person cost for open-access PPO/POS plans are projected to increase 7.3%.4

While this may seem steep, let’s put it in perspective. The PwC study indicates it’s slightly lower than the increase in medical costs for 2021 and slightly higher than the five years before that when it comes to healthcare cost increases.And the Segal survey found projected medical plan cost increases for 2022 are similar to pre-pandemic increases.4

Health Factors Contributing to the Increase

While healthcare cost increases by year are common and can go up under any circumstances based on provider price increases, the pandemic presents a new set of health-related behaviors and virus-specific factors that have potential to affect both employers and employees.

As mentioned previously, some people chose to postpone or even eliminate their care during the pandemic, creating historic lows in utilization.All of that skipping of preventive or other care during this time means we’ll likely see more people using their benefits in 2022 to get themselves back on track. It’s also likely that we’ll see new health issues arise, possibly from delaying care, but also because of the mental health and substance use crises that grew during this time, as well as worsening overall population health.1

Since the pandemic started, there’s been a substantial increase in demand for mental health services. In fact, according to a September 2020 survey from the National Council for Behavioral Health, 52% of behavioral health organizations reported an increase in demand for their services.And a LexisNexis report showed an astounding increase of over 6,500% in telehealth claims for behavioral health services from January 2020 to February 2021.With all the ongoing changes and uncertainty, Americans need mental and behavioral health services and this trend is expected to continue past 2021.5

The opioid epidemic also reached epic proportions between October 2019 and September 2020, according to the CDC. And some U.S. hospitals are reporting increased admissions for alcoholic liver disease of up to 50%. Other contributing factors include poor pandemic-era health behaviors such as lack of exercise, poor nutrition, and smoking.1

Other health issues stem more directly from the virus, such as those who survived severe COVID-19 who may require months of additional care after leaving a hospital. Or those known as “long-haulers,” who can also have symptoms that may require medical attention for months after contracting the virus. In addition, the costs of testing for COVID-19, treating patients, and administering vaccinations for the disease will continue into 2022.1

Another ongoing contributor to the rise in healthcare costs is the expanding geriatric population in the U.S. Not only will this mean more long-term healthcare costs, but it also means that demand for healthcare will outpace supply, something we’re already seeing with staffing shortages related to the pandemic.

How Investments and Inflation Are Increasing Costs

While investments by the healthcare industry may be driving costs up in the short term, they should ultimately pay off by creating a higher level of pandemic readiness, driving growth, and building better relationships.2

Preparation for the next pandemic includes investing in predictive modeling to help avoid supply chain disruptions, as well as infection control, technology, connectivity, and cybersecurity. Costs for personal protective equipment and staffing have also increased.2

According to the Society for Human Resource Management, the annual increase in health benefits costs routinely outpaces general inflation as medical services are subject to unique cost factors.7 And general inflation is the highest it’s been since November of 1990, with the annual inflation rate in the U.S. surging to 6.2% in October of 2021. 8

Another leading cost driver for the past decade has been hospital price inflation, which is currently the largest component of 2022 projected medical trends. This is largely due to mergers creating larger hospital systems with more bargaining power, and increased enrollment in Medicaid and Medicare, which puts pressure on hospitals to replace lost income from lower reimbursement rates from those programs.4

Projected healthcare cost increases

What This Means for Employers and Employees

Employers and employees can anticipate, on average, a 6.5% increase in medical costs.1 Employees could also see an 8.4% increase in outpatient prescription drug costs, an increase of 13.4% in specialty drugs/biologics, a 3.1% increase in dental provider organization costs, a 7.3% increase in per-person cost for open-access PPO/POS plans,and an increase of 4.7% in employer-sponsored health insurance premiums.3

The implications of these cost increases remain to be seen, and employers may need to adjust their benefit plans accordingly. If the cost of employer health coverage increases, but an employer doesn't want to increase employee healthcare costs, funds for other benefits and raises, for example, could be affected.

Pandemic-related diagnostic testing may need to be knitted into return-to-work strategies for employers and factored into the budget. A whopping 89% of immunologists, infectious-disease researchers and virologists surveyed by the journal Nature in January 2021 said that the virus will circulate after the pandemic ends, which means testing for it may also become a recurring seasonal cost during the winter months.1

The costs for vaccines and booster shots could also increase spending in 2022, potentially affecting employers and employees. This will largely depend on how long the U.S. government will pay for the vaccines and, when a commercial market emerges, how much manufacturers will charge for them.1

Employees should look for ways to reduce their costs, such as taking full advantage of any tax-friendly employer health insurance options available to them, like a health savings account (HSA) or a healthcare flexible spending account (Health FSA). They can also choose lower-cost care options when appropriate, such as telehealth, retail clinics, or opting for urgent care over an emergency room visit.

The Bottom Line

Employers can consider investing savings from lower-than-expected healthcare spending in 2020 in disease management programs, expanded mental health benefits, or nutrition and exercise discounts/programs that could help mitigate or reverse some of the fallout of poor health behaviors and isolation of the pandemic.1

Employees can view healthcare as an investment in themselves and should be proactive about getting the help they need. Pursuing preventive care like annual wellness exams and dental cleanings, exploring mental health assistance, and scheduling any postponed procedures have the potential to help them own their personal health and avoid negative long-term effects.

While we’re all facing some additional challenges these days, good health is more important than ever. When employers and employees work together to achieve this end, any current costs of care can help prevent higher healthcare costs in the future resulting from unaddressed healthcare needs.

Things to Consider:

  • Employers can invest savings from lower-than-expected healthcare spending in 2020 into disease management programs, expanded mental health benefits, or nutrition and exercise programs to help mitigate the effects of the pandemic.1
  • Employees can be proactive about getting the help they need, such as preventive care, mental health assistance, and any required procedures.
  • Employers and employees can work together to improve healthcare outcomes and avoid even higher healthcare expenditures in the future.


1 “Medical Cost Trend: Behind the Numbers 2022,” PwC Health Research Institute, 2021

2 “Employer Health Costs Projected to Rise 6.5% in 2022 Due in Part to COVID-19,” Healthcare Finance, June 2021

3 “Health Plan Cost Increases for 2022 Return to Pre-Pandemic Levels,” Society for Human Resource Management, October 2021

4 “What Are the Projected 2022 Health Plan Cost Trends?” Segal, 2021

5 “7 Mental and Behavioral Health Trends of 2021,” MASC Medical, September 2021

6 “COVID-19 2021 Mental Health Impact Report,” LexisNexis, 2021

7 “Inflation, Other Factors, Drive Up Health Care Costs,” Society for Human Resource Management, June 2021

8 “Consumer Price Index,” Bureau of Labor Statistics, October 2021


Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.