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Projected cost increases for all types of medical plans in the U.S. are anticipated to slow a bit through the first half of 2013, according to a survey by Buck Consultants. For the first time since 2001, Buck’s annual National Health Care Trend Survey indicated projected cost increases less than 10 percent for any plan type for 2012, a trend that will continue into 2013.
The national survey of 123 insurers and administrators measured the projected average annual increase in employer-provided health care benefit costs. Insurers and administrators providing medical cost trends for the survey covered a total of approximately 109 million people.
Buck’s late 2012 survey (forecasting 2013 cost increases) found that costs are projected to increase at rates that are slightly lower than the prior year’s survey, as shown below.
Preferred provider organization (PPO)
Health maintenance organization (HMO)
High-deductible health plan (HDHP)
Source: Buck Consultants.
“Despite the lower (cost) trend, health care costs continue to outpace general inflation—creating difficult business decisions for organizations,” said Daniel Levin, FSA, a Buck principal and consulting actuary who directed the survey, in a news release announcing the results. “The stubbornly high costs can be attributed to several trends, ranging from a greater use of diagnostic tests and treatments to mandated coverage of certain benefits. Employers need to decide how much of these increases to pass on to workers, or whether to drop coverage and pay the penalties imposed by the Patient Protection and Affordable Care Act.”
Prescription Drug Plan Costs
Health insurers reported an average prescription drug cost increase trend of 10.1 percent, up 0.5 percent from the prior year’s survey. This was more than twice the 4.1 percent cost increase reported by pharmacy benefit managers (PBMs)—third-party administrators of prescription drug programs who generally, unlike insurers, do not take any underwriting risk. The continued shift to generic drug use is a significant factor in the reduced drug cost trends shown by PBMs.
Retiree Health Plan Costs
For plans that supplement Medicare, health insurers reported a cost trend of 5.4 percent excluding prescription drug coverage, down from 5.8 percent in the prior survey. This lower cost trend of Medicare supplement (“Medigap”) plans reflects the impact of federal controls on Medicare fees and the lower increases expected in Medicare deductibles and co-pays.
“Another health care trend we’ll be watching is the impact of private health insurance exchanges,” Levin said. “It remains to be seen how the development of private exchanges will affect the use of public exchange models, but it could likely impact the projected cost trends we measure in this survey.”
Health insurers use cost trend factors to calculate premium rates, and large self-funded employers use these factors to budget their future health care costs. In general, trend factors provide for price increases that may result from variables such as inflation, use of services, technology, changes in the mix of services and mandated benefits.
Health Cost Forecasts Vary
Different surveys, using different methodologies, can report varying cost increase rates for health care benefits in the U.S.
For instance, in 2012 U.S. companies and their employees saw the lowest health care premium rate increases in six years, according to an analysis released in October 2012 by consultancy Aon Hewitt. The average health care premium rate increase for large employers was 4.9 percent, down from 8.5 percent in 2011 and 6.2 percent in 2010, Aon Hewitt found. In 2013, however, average health care premium increases were projected to jump up to 6.3 percent, the consultancy forecast (see the SHRM Online article “6.3% Health Premium Increases Projected for 2013”).
HR consultancy Mercer’s National Survey of Employer-Sponsored Health Plans, conducted annually among U.S. public and private employers with at least 10 employees and released in November 2012, found that growth in the average total health benefit cost per employee slowed from 6.1 percent in 2011 to just 4.1 percent in 2012. Costs averaged $10,558 per employee in 2012, while large employers (those with 500 or more employees) experienced both a higher increase (5.4 percent) and higher average cost (see the SHRM Online article “Employers Held Health Benefit Cost Growth to 4.1% in 2012”).
A survey by the National Business Group on Health released in August 2012 showed that the largest U.S. corporations expect health care premiums to rise 7 percent in 2013. In response, employers are eyeing a variety of cost-control measures, including asking workers to pay a greater portion of premiums and sharply boosting financial rewards to engage workers in healthy lifestyles (see the SHRM Online article “Large Employers Expect Health Benefits to Increase 7 Percent in 2013.”)
Stephen Miller, CEBS, is an online editor/manager for SHRM.
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