Provider, Political Pressures Push Health Costs Higher

October 29, 2001 ( - The Segal Company forecasts that retail prescription drug coverage should experience a 19.4% trend rate increase for active members and retirees under age 65 and a 20.5% trend rate for retirees over the age of 65.

In 2002, prescription drugs are expected to comprise 18% of the total medical cost, up from 10% in 1995, according to the 2002 Segal Health Plan Cost Trend Survey

Mail order prescription costs are expected to climb 18.8% next year. Still, the cost increases for drugs in 2001 are currently just 15% versus a projected 20%. However, the full impact of the terrorist attacks and aftermath is not yet reflected in these results.

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Healthcare Costs “Pressured”

On the other hand, trends for non-network fee-for-service (FFS), preferred provider organization, point-of-service and health maintenance organization (HMO) plans are all now projected to be greater than 2001 trend forecasts. The medical cost trend rates in 2002 are projected to be 1 to 3 percentage points higher than Segal’s 2001 projections.

Actual 2001 HMO cost increases exceeded projections by over 4 percentage points and grew faster than the other providers’ costs for the first time since 1997, according to the report.

The survey forecast that overall medical cost trend rates for 2002 would rise:

  • 16.4% for non-network fee-for-service plans
  • 14% for PPOs
  • 13.5% for point-of-service plans
  • 12.8% for HMOs.

The reports notes that managed care plans are raising provider reimbursement levels and liberalizing plan rules for participants in response to political and provider pressures.

Control Caps

Segal notes that the ability of managed care to control medical cost increases has eroded due to:

  • consumer-directed prescription drug marketing
  • higher provider reimbursements
  • liberalization of plan rules
  • increased regulation
  • aging of the workforce

Consequently, to contain health care costs, plan sponsors will have to adopt strategies that increase members active involvement as cost conscious consumers and hold providers accountable.

The firm surveyed approximately 150 payers across the country, which individually provide care to memberships of between 100 and 50,000 workers.