Health Plan Trend Rates to Decline in 2013
The Segal Company’s 16th annual survey of health plan cost trends found almost all medical plan types are expected to experience trend increases less than 10% (with the exception of fee-for-service/indemnity plans). All managed care cost trends are forecast to be in the single digits.
Trends for health maintenance organizations (HMOs), preferred provider organizations (PPOs) and point-of-service (POS) plans are projected to be approximately one percentage point or more lower for 2013 than were projected for 2012. Pharmacy benefit cost trends are projected to be 6.4%, substantially below the double digit trends of a decade earlier.
Trend is a forecast of per capita claims cost increases that takes into account various factors, such as price inflation, utilization, government-mandated benefits and new treatments, therapies and technology, Segal explained. Although there is usually a high correlation between a trend rate and the actual cost increase assessed by a carrier, trend and the net annual change in plan costs are not the same. Changes in the costs to plan sponsors can be significantly different from projected claims cost trends, reflecting such diverse factors as group demographics, changes in plan design, administrative fees, reinsurance premiums and changes in participant contributions.When comparing projections for 2011 to actual increases, Segal found that insurers and pharmacy benefit managers (PBMs) tend to make conservative projections for cost increases.
In 2011, actual medical and prescription drug trend rates were significantly lower than projections. For example, the actual trend rate for PPOs for actives and retirees younger than 65 was 7.5%, while the projected PPO trend rate was 11%.
Segal said the deceleration in medical plan costs trends is likely the product of several forces, including plan designs that encourage use of lower-cost providers, greater shift to generic drugs and less intensive treatments, and improved medical management efforts, such as greater investment in hospital-discharge coaching.
Full results of the 2013 Segal Health Plan Cost Trend Survey are at http://www.segalco.com/publications/surveysandstudies/2013trendsurvey.pdf.
An online supplement to the report features a graph that shows selected actual and projected trend data from the last 13 surveys and another graph of selected medical trends for actives and retirees younger than age 65. The supplement is at http://www.segalco.com/publications/surveysandstudies/2013trendsurveysupplement.pdf.