George R. Kelder Jr., CFSP
If you have watched the news lately, you've probably heard that healthcare costs are expected to increase by about 9 percent this year. Then your healthcare renewal arrives showing an increase that's two or three times higher.
Your first reaction is probably, "Wait a minute...someone's math doesn't add up." Actually, it does.
The 9 percent figure making headlines isn't your premium increase. It's what's known as the medical trend, essentially the expected increase in the cost of healthcare across the country. Think of it as healthcare inflation.
Your renewal, however, is based on much more than inflation alone.
Suppose grocery prices increase by 9 percent. If you buy exactly the same groceries as you did last year, your grocery bill will probably increase by about 9 percent.
But what if your family grew? What if you're buying more food, items became more expensive or you’re entertaining more often? Your grocery bill could easily increase by 20 percent or more, not because inflation was wrong, but because your family's actual experience was different from the national average.
Healthcare works exactly the same way. The national trend tells us what medical care is expected to cost. Your renewal reflects what actually happened within the health plan.
Several factors determine what a healthcare plan costs each year.
The first is the national increase in healthcare costs. Association Member Trust which provides access to multiple self-insured healthcare plans administered through the Horizon Blue Cross/Blue Shield network for our New Jersey State Funeral Directors Association members, assumes an 8.5 percent increase for medical services and 10 percent for prescription drugs, increases that are right in line with national projections. But that's only the beginning.
The next factor is how much health care members actually used. More office visits, surgeries, prescriptions, imaging studies and specialist care all increase costs.
Then there's something called plan design. Even when deductibles and copays stay exactly the same, the underlying cost of healthcare continues to rise. That means the health plan quietly pays a larger share of every claim.
Finally, every self-funded health plan experiences occasional high-cost claims. A complicated hospitalization, specialty medications, cancer treatment or a premature birth can cost hundreds of thousands of dollars. Fortunately, these cases are relatively rare, but even a handful can significantly affect a group's annual claims experience.
In addition to paying claims, every plan must also cover the cost of administration, stop-loss insurance that protects against catastrophic claims, reserves and other operating expenses.
When all of those pieces come together, it's easy to see why a renewal can differ significantly from the national trend reported in the news.
Even though healthcare costs are increasing across the country, it doesn't mean AMT simply accepts higher costs as inevitable.
The AMT trustees, among which NJSFDA Chief Operating/Chief Financial Officer Barbara Guinta and I are counted, continually review where the Association Member Trust's dollars are being spent and look for ways to reduce unnecessary expenses while preserving quality healthcare coverage for our funeral directors.
One of the biggest opportunities involves elective out-of-network care.
Last year alone, AMT paid more than $7 million for non-emergency services performed outside the provider network. In many cases, those same services were available from participating providers at significantly lower negotiated rates.
For that reason, AMT has already stopped marketing plans that include out-of-network benefits and will begin transitioning participating employers to comparable in-network plans beginning with January 2027 renewals.
It's also important to note what isn't changing. Emergency care and treatment at out-of-network facilities which result from accidental injuries will continue to be covered at the in-network level, as required under federal law.
The goal isn't to reduce access to care. It's to eliminate unnecessary costs that ultimately affect every individual participating in AMT.
Prescription medications now represent more than 30 percent of AMT's total healthcare spending. One way Association Member Trust has responded is by expanding the use of biosimilars. These medications provide the same clinical benefits as certain high-cost specialty drugs but at a significantly lower cost. That initiative has already saved AMT more than $1 million without compromising patient care.
Few areas of healthcare have changed as rapidly as GLP-1 medications. These drugs have become important treatments for certain medical conditions, but they also represent one of the fastest-growing costs for employer health plans nationwide.
Association Member Trust stopped covering GLP-1 medications like Ozempic, Wegovy and similar drugs when prescribed only for weight loss, beginning in 2024. AMT knows these medications can be important, so they continue to be covered when there's a clear medical need, for example, to treat Type 2 diabetes or a liver condition called MASH.
No one likes rising healthcare costs. Unfortunately, they have become a reality for virtually every employer-sponsored health plan in America. The good news is that AMT isn't standing still.
The state-run health insurance program that provides coverage to school employees just announced that it faces huge premium increases in the coming year. The School Employees’ Health Benefits Commission has been informed that premium increases of 34 percent for combined medical and drug benefits for current employees is recommended.
From the NJSFDA’s and AMT’s perspective, every significant cost driver is being evaluated, from out-of-network utilization to pharmacy spending to specialty medications, with one goal in mind: preserving quality healthcare coverage while keeping it as affordable as possible for our participating funeral homes.
The national healthcare trend tells only part of the story. Your renewal, whether with AMT or another plan, reflects the real-world experience of your health plan and the actual cost of providing comprehensive coverage.
Understanding that difference won't make higher premiums any easier to accept, but it does explain why the numbers in the headlines and the numbers on your renewal aren't always the same.
If you have questions about your healthcare renewal or the options available to your funeral home, Association Member Trust representatives are always available to help. Feel free to request a quote at https://amt-nj.com/ or call 973.379.1090.