More Variation in Health Benefit Cost Trends for 2015

October 3, 2014 ( - Health benefit plan cost trend rates for 2015 are forecast to drop slightly for some coverage, but to increase substantially for prescription drug coverage, according to The Segal Group.

Data from the 2015 Segal Health Plan Cost Trend Survey shows increases in medical trends are projected to range from a low of 6.2% for health maintenance organizations (HMOs) to a high of 10.4% for fee-for-service coverage. There will be a marginal decline from 2014 in the projected trend rate for open-access preferred provider organizations (PPO) and point-of-service (POS) plans for 2015 (7.9% to 7.8%).

The data projects higher trend rates for all prescription drug benefit plan types. The trend for carve-out coverage is projected to jump, from 6.3% in 2014, to 8.6% in 2015. The carve-out trend for retirees 65 and older is projected to rise, from 5.7% in 2014, to 7.5% in 2015, more than twice the rate of retiree medical cost trends.

The Segal Group explains that “trend” is the forecast of annual gross per capita claims cost increases.

“As has been the case in the past, forecasts are generally higher than actual experience, as insurers and analysts typically add margin to estimates to cover claim volatility,” says Edward Kaplan, Segal’s National Health Practice Leader. “In 2013, actual trends for managed care plans were the lowest reported in more than 12 years.”

As the health benefits landscape continues to change, Kaplan adds, “Sponsors of large group plans must stay focused on exploring health plan strategies that produce high-value medical benefits with stable cost trends. This will help avoid future excise taxes.”

Survey participants were asked to indicate the top cost-management strategies implemented in 2014. The common strategies implemented for medical plans included:

  • expand use of low-cost primary-care access (telehealth, walk-in clinics, worksite clinics);
  • reference-based pricing (see “Employers Considering New Tactics to Tame Health Care Costs”);
  • follow the Medicare hospital readmissions reduction program to reduce hospital readmissions;
  • value-based contracting, including Accountable Care Organizations (ACOs), Patient-Centered Medical Homes (PCMHs) and use of narrow/tiered networks;
  • defined contribution approaches with or without the use of private exchanges; and
  • continued focus on wellness.

 The survey includes data from managed care organizations (MCOs), health insurers, pharmacy benefit managers (PBMs) and third-party administrators (TPAs). More survey findings can be found here.