Health Costs Projected to Increase Less than 10% for 2012


By SHRM Online staff April 9, 2012

Costs for all types of medical plans in the U.S. are expected to increase by 9.9 percent for 2012, according to a survey by Buck Consultants. This is the first time since 2001 that Buck’s survey has projected cost increases less than 10 percent for any type of plan.

The survey, conducted annually since 1999, measures the projected average annual increase in employer-provided health care benefit costs. Insurers and administrators providing medical cost increase trends cover a total of approximately 109 million people.

In its National Health Care Trend Survey 2012 report, Buck found that costs are projected to increase at rates that are more than a full percentage point lower than its survey for 2011.

Type of plan

2012 cost trend increase

2011 cost trend increase

Preferred provider organization (PPO)



Point-of-service (POS)



Health maintenance organization (HMO)



High deductible health plan (HDHP)



Source: Buck Consultants.

“The reduced trend factors reported in our survey reflect that health insurers, who may have previously added margins to account for health care reform benefit changes mandated for 2011, have now removed those margins for 2012 projections,” said Daniel Levin, a Buck principal and consulting actuary who directed the survey. “The reduction also reflects lower expected costs as a result of the economic slowdown. Employees are trying to reduce their out-of-pocket expenses and are postponing elective medical services.

“The trends are not varying by plan type as they have in previous surveys,” added Levin. “This may indicate that insurers do not currently see network type as a significant reason for modifying trend factors.”

Among other findings:

• For prescription drug plans, health insurers reported an average cost increase trend of 9.6 percent, down 1.1 percentage points from the 2011 survey. It is, however, more than twice the 4.6 percent increase reported by pharmacy benefit managers (PBMs)—third-party administrators of prescription drug programs that generally do not take any underwriting risk.

• For plans that supplement Medicare, ​health insurers reported a projected increase of 5.8 percent excluding prescription drug coverage, up from 5.3 percent in the prior survey. This lower trend of Medicare Supplement plans reflects the impact of federal controls on Medicare fees and the lower increases expected in Medicare deductibles and co-payments.

“Despite the lower trend factors found in our survey, health care costs continue to outpace both general inflation and wage increases—creating real business challenges for organizations,” said Levin. “We’ve seen increased interest from plan sponsors for strategies to optimize alternative delivery systems such as exchange models and accountable care organizations.”

Health insurers use cost increase trend factors to calculate premium rates, and large self-funded employers use these trend factors to budget their future health care costs. In general, trend factors provide for price increases that might result from such variables as inflation, use of services, technology, changes in the mix of services and mandated benefits.

Other Cost Projections

Different surveys produce differing results. According to the National Survey of Employer-Sponsored Health Plans conducted annually by HR consultancy Mercer, growth in the average total health benefit cost per employee, which had reached 6.9 percent in 2010, slowed to 6.1 percent in 2011, with an increase of 5.7 percent expected for 2012.

According to consultancy Towers Watson’s Health Care Changes Ahead survey report, health care plan costs were expected to rise 5.9 percent in 2012 compared to 7.6 percent in 2011.

To learn more about these projections, see the SHRM Online article "Employers Accelerate Efforts to Control Health Plan Costs."

Related Articles—SHRM:

Half of Employer Health Plans Have No In-Network Deductible, SHRM Online Benefits Discipline, April 2012

Health Care Benefits Changes on the Horizon, SHRM Online Benefits Discipline, March 2012

Employers Accelerate Efforts to Control Health Plan Costs, SHRM Online Benefits Discipline, November 2011

Per Employee Health Coverage to Cross $10,000 Threshold, SHRM Online Benefits Discipline, October 2011

Slower Health Benefit Cost Growth Seen for 2012, SHRM Online Benefits Discipline, September 2011

Related Report—External:

2012 Segal Health Plan Cost Trend Survey, The Segal Company, September 2011

Quick Links:

SHRM Online Benefits Discipline

SHRM Online Health Care Reform Resource Page

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