Employers Can Expect 8.5% Increase in Health Care Costs in 2012

May 18, 2011 (PLANSPONSOR.com) – According to PricewaterhouseCoopers (PwC), U.S. employers can expect an 8.5% increase in their 2012 medical costs.

However, PwC said plan design changes are likely to keep employers’ health costs increases at about 7%.  

According to PwC’s report, key accelerators to costs include: 

  • Provider consolidation continues – More physicians and hospitals are merging, making payers concerned about the impact of increased consolidation on payment rates;  
  • Cost-shifting from Medicare and Medicaid increases – In 2012, the increase in Medicare inpatient hospital rates is expected to be 3.3 percentage points below the expected growth in their costs; 
  • Post-recession stress builds up on workforce – Health plans and employers are reporting that they are beginning to notice post recession stress taking its toll on workers’ health as well as medical utilization deferred during the depth of the recession. 


Key deflators of cost include: 

  • Blockbuster brand name drugs go off patent – PwC said in 2012, the cumulative sales of drugs going off patent will be the largest in history; 
  • Tiering on out-of-network providers is put in place – Employers are increasing deductibles, making it far less attractive for workers to go out of network, and in some markets, payers are becoming more selective about who’s in the network; 
  • High-deductible plans force more cost-sharing – HDHPs were the fasting growing plan designs, according to the survey – in 2011, 17% of employers said HDHPs were their most common benefit designs, up from 13% in 2010. 


The report, Behind the numbers: Medical cost trends for 2012, can be downloaded from here.  A free registration is required.