New Study Projects Health Care Costs to Increase More Slowly

Even though the decline is good news, most plan sponsors still find 8-9 percent cost increases unsustainable.”

By Harvey Sobel, principal and consulting actuary for Buck Consultants, A Xerox Company

Projected cost increases for all types of medical plans are anticipated to be down by between 0.1 and 0.5 percent in 2014. This continues the favorable trend of slow, steady declines generally experienced since 2010.

In our national survey of 126 insurers and administrators, Buck Consultants measured the projected average annual increase in employer-provided health care benefit costs. Insurers and administrators who provided medical trends for the survey cover a total of approximately 119 million people.

Our 28th National Health Care Trend Survey found costs are projected to increase at rates that are lower than we reported in recent prior surveys, as shown in the following chart.

Buck Consultants Survey Finds Health Costs Continue to Increase,

Some survey respondents cited reduced utilization as the primary reason for the decrease.This may be a result of the economic slowdown and its impact on consumers’ willingness to seek medical treatment. Even though the decline is good news, most plan sponsors still find 8-9 percent cost increases unsustainable.

Health insurers reported an average prescription drug trend of 9.2 percent, a decrease of 0.7 percent from the prior survey. On the other hand, pharmacy benefit managers, who generally do not take any underwriting risk, reported a weighted average trend factor of 4.1% – less than half of the factor reported by health insurers – but still up by 0.3% from the 3.8% reported in the prior survey.

For plans that supplement Medicare, health insurers reported a trend of 5.5 percent excluding prescription drug coverage, up from 4.1 percent in the prior survey. Medicare Supplement plans generally have lower trends than other medical plans due to the impact of federal controls on Medicare fees and the smaller increases expected in Medicare deductibles and copays.

The survey also reported trend factors for dental and vision plans.

Daniel Levin, my colleague and co-author of the survey, notes that it’s too soon to tell the impact of public and private health exchanges. We believe it may take another few years before we really know if (and by how much) the exchanges will “bend” the cost curve.

Click this image to purchase Buck’s 28th National Health Care Trend Survey. It is available for $100.


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