Slowing Healthcare Cost Increases Still Unsustainable

May 16, 2014
Laura Joszt

Cost increases for medical plans are projected to continue the trend of steady declines begun in 2010, but cost increases are still considered unsustainable at 8% to 9%.

Cost increases for medical plans are projected to continue the trend of slow, steady declines begun in 2010, according to a new report.

In the 28th National Health Care Trend Survey, Buck Consultants, a Xerox Company, surveyed 126 insurers and administrators nationally and found costs should increase at lower rates than in prior surveys. Point-of-service (POS) plans will see the slowest increase of just 8.5%, which is down from 8.8% and 9% in the two previous surveys.

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

The primary reason for the decrease in cost increases was reduced utilization, according to some survey respondents. However, in the first quarter of 2014 utilization was up. The Bureau of Economic Analysis reported healthcare spending increased 9.9% in the first 3 months of the year.

According to the White House blog, the spike in spending—the largest since 1980—was attributable to increased utilization driven by newly insured Americans under the Affordable Care Act. During that time healthcare prices only increased 0.5%.

In a separate survey, Towers Watson found US employers expected the cost of providing employer-sponsored health care benefits would increase 4.4% this year to reach $9,560 per employee. Although this was just a slight uptick from the previous year's 4.1% increase (a 15-year low), employees' share of premiums increased nearly 7% to $2,975 this year.

Insurers in the Buck survey reported an average prescription drug trend of 9.2%, which was down almost a full percentage point from the prior survey.

Plans supplementing Medicare reported a 5.5% trend excluding prescription drug coverage. In the previous survey the trend was only 4.1%. These plans typically have lower trends, though, because of federal controls on Medicare fees while Medicare deductibles and copays have smaller expected increases, according to Buck.

"It's too soon to tell the impact of public and private health exchanges on trend," Daniel Levin FSA, a Buck principal and consulting actuary, who co-authored the survey, said in a statement. "It may take another few years before we really know if (and by how much) the exchanges will "bend" the cost curve."