After design changes, health care costs will increase 4.5 percent in 2016

In 2016, health care costs will increase 6.5 percent, but after likely changes in benefit plan design, such as higher deductibles and co-pays, the net growth is expected to be 4.5 percent, according to recent research from PricewaterhouseCooper’s (PwC) Health Research Institute (HRI). The report, Medical Cost Trend: Behind the Numbers 2016, noted that while cost increases are low, medical inflation still outpaces general economic inflation. In addition, while the health sector has adopted structural changes to improve efficiency and quality, most of the slowing growth is attributable to cost-shifting onto consumers.

PwC HRI found that several factors will intensify spending in 2016. For instance, new specialty drugs entering the market in 2015 and 2016 bring with them the hope for new cures and treatments, but at a high cost. And, major cyber security breaches are prompting health companies to take extra steps to protect sensitive personal information from external threats. Investments to guard personal health data will add to the overall cost of delivering care in 2016 and beyond, PwC noted. But moderating forces are expected to hold growth in check. Insurance plan designs influence how often and to what extent employees use health services. HRI research confirms that employers intend to continue shifting costs onto employees, which prompts many workers to scale back on services or search for alternatives.

PwC believes that the looming “Cadillac” tax is one of the factors accelerating the use of cost-shift to employees. The Patient Protection and Affordable Care Act’s 40 percent excise tax on high cost health plans (those plans with premiums over $10,200 for individual and $27,500 for family coverage) is making employers up the amount that employees must pay to reduce their costs.


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