Medical Cost Increases Predicted to Be Lower

May 15, 2014 (PLANSPONSOR.com) – Buck Consultants predicts cost increases for medical plans will be lower in 2014.

The 28th National Health Care Trend Survey estimates cost increases for all types of medical plans will be down by between 0.1% and 0.5% this year, continuing a favorable trend of slow, steady declines generally experienced since 2010.

The survey finds medical plan costs are projected to increase at rates that are lower than prior surveys done in recent years. For example, with Preferred Provider Organization (PPO) plans, costs are only predicted to increase by 8.7% in 2014, compared with 9% and 9.2%, respectively, in the two previous surveys. For Point-of-Service (POS) plans, the predicted cost increase is 8.5%, compared with 8.8% and 9% in the last two surveys. For Health Maintenance Organization (HMO) plans, the predicted cost increase is 8.6%, compared with 8.7% and 8.8%. And with High Deductible Health Plans (HDHPs), the predicted increase is 8.6%, compared with 9.1% and 9.1%.

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“This may be a result of the economic slowdown and its impact on consumers’ willingness to seek medical treatment,” says Harvey Sobel, a Buck principal and consulting actuary who co-authored the survey, who is based in New York. “Even though the decline is good news, most plan sponsors still find 8% to 9% cost increases unsustainable.”

Survey results also show health insurers reported an average prescription drug trend of 9.2%, a decrease of 0.7% 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.

In addition, for plans that supplement Medicare, health insurers reported a trend of 5.5% excluding prescription drug coverage, up from 4.1% in the prior survey. The survey report notes that 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.

As for the impact of public and private health exchanges on medical plan costs, it’s too soon to tell, says Daniel Levin, a Buck principal and consulting actuary, who also co-authored the survey. “It may take another few years before we really know if, and by how much, the exchanges will bend the cost curve,” he says.

The national survey queried 126 insurers and administrators. Insurers and administrators providing medical trends for the survey cover a total of approximately 119 million people. A copy of the survey results is available to interested parties for $100 by visiting www.bucksurveys.com.

Buck Consultants is a provider of services in the areas of retirement benefits, health and welfare programs, talent and human resources solutions, compensation, and employee communication.

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