Price Inflation Again to Blame for Much of Projected Rising Health Plan Costs

The Segal Group’s new Health Plan Cost Trend Survey reveals that, as found by its last year’s survey, price inflation will be the main driver of projected health plan cost increases in 2018.

This will be seen most notably in prescription drugs, with projected 8.8% price inflation, and hospital services, with projected 4.6% price inflation. Compare those jumps with the projected growth in use of prescription drugs and hospital services—only 2.1% and 1.5%, respectively, Segal found.

Yet, there are options available to mitigate the price inflation, according to Eileen Flick, senior vice president and director of health technical services at Segal in New York City. She says, “Plan sponsors should consider using alternative value-based payment approaches such as accountable care organizations and bundled payments for episodes of care. Under these payment alternatives, providers are reimbursed at a set rate for all services involved in an episode, and they are accountable for the quality of care and outcomes. We have also seen a continued push toward specialized pharmacy management and intensified pharmacy management programs.”

According to the survey, some of the price inflation results from inappropriate use of emergency rooms and urgent-care facilities, as well as from unnecessary, expensive diagnostic radiology procedures, when a simple X-ray would suffice. “Plan sponsors should ensure their plan designs properly align with the costs of care and that participants are making smart choices in order to get the right care at the right place with the right provider,” Flick says.