Surveys Predict Single-Digit Health Care Cost Increases In 2013

from Spencer’s Benefits Reports: Several recently-released surveys are predicting single-digit health care cost increases in 2013. The surveys were released by Aon Hewitt, Segal Company, Wells Fargo, Truven Health Analytics, and the Bipartisan Policy Center.

Aon Hewitt. In 2013, Aon Hewitt is predicting a 6.3 percent health care premium increase, up from the 4.9 percent increase in 2012. The Aon Hewitt Health Value Initiative found that health maintenance organizations (HMOs) will see a 7.0 percent increase in 2013, preferred provider organizations (PPOs) will experience a 6.1 percent increase, and point-of-service (POS) plans also will see a 6.1 percent increase. That means from 2012 to 2013, the average cost per person for major companies is estimated to increase from $10,659 to $11,405 for HMOs, $10,433 to $11,069 for PPOs, and $11,062 to $11,737 for POS plans, Aon Hewitt noted.

For 2013, average health care costs for all plan types per employee are projected to increase to $11,188, up from $10,522 in 2012. Consistent with the previous two years, employees will be asked to contribute 21 percent of the total health care premium, which equates to $2,385 for 2013, Aon Hewitt noted. Average employee out-of-pocket costs are expected to increase to $2,429. These projections mean that over the last five years, employees’ share of health care costs—including employee contributions and out-of-pocket costs—will have increased more than 50 percent from $3,199 in 2008 to $4,814 in 2013, the survey found.

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Segal Company. In 2013, health benefit plan costs are expected to decline to the lowest level in 11 years, with most medical and all prescription drug projected trends dropping into single digits, according to research from Segal Company. The 2013 Segal Health Plan Cost Trend Survey found that HMOs will experience the lowest increase, at 7.9 percent, followed by POS plans (8.3 percent), high-deductible health plans (8.6 percent), and PPOs (8.8 percent). Segal noted that the trends for HMOs, PPOs, and POS plans all are projected to be 1 percentage point or lower for 2013 than were projected for 2012.

The prescription drug trend for active participants and early retirees is projected to be 6.4 percent, a drop of more than 13 percentage points from ten years ago, Segal noted. Dental rates also dropped slightly from 2012: dental PPOs are projected to increase 3.5 percent in 2013, down from 3.8 percent in 2012. Costs for vision plans will increase 2.8 percent in 2013.

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Wells Fargo. The Wells Fargo Insurance Employee Benefits Survey found results similar to Segal. In 2013, Wells Fargo projects that the cost of HMOs will rise 8.5 percent, followed by POS plans (8.7 percent), and PPOs and consumer-driven health plans (9.3 percent). Prescription plans are projected to increase 7.6 percent in 2013.

“Despite ongoing efforts to control health care expenses, the survey found that insurers are not expecting a drop in claim costs for 2013,” said Dan Gowen, senior vice president of Wells Fargo Insurance’s national employee benefits practice. “This means that employer premiums will likely rise, and it’s also likely consumers may pay more for their share of employer-sponsored health care plans. Employers seeking to minimize cost increases should explore more sophisticated ways to maintain and improve the health risk of employees and maximize their benefit investment.”

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Truven Health Analytics. The recently-released US Employer Benchmarks and Trends report projects that medical and pharmacy costs for employees and their dependents will grow at a moderate rate of 4 percent to 5 percent in 2012 and 2013. This follows a 4.6 percent increase from 2010 to 2011, which was the smallest increase in annual employer health care costs over the last five years, according to the consultant.

The Patient Protection and Affordable Care Act (ACA) extended coverage to dependent children through age 26. Truven found that this provision accounted for 1.4 percent of the overall 4.6 percent increase in employer health care services. The ACA also requires plans to cover more preventive services, which resulted in a 3.8 percent increase in physician’s office visits, Truven noted.

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Bipartisan Policy Center (BPC). This bipartisan think tank did not examine how much costs are increasing, but rather examined why costs are increasing in the report, What is Driving U.S. Health Care Spending? America’s Unsustainable Health Care Cost Growth. The report found that health care costs are expected to increase in coming years due to population growth, utilization, intensity of health care services, and increasing prices.

Specific drivers detailed in the report include: fee-for-service reimbursement; fragmentation in care delivery; administrative burden on providers, payers and patients; population aging, rising rates of chronic disease, as well as lifestyle factors and personal health choices; advances in medical technology; tax treatment of health insurance; insurance benefit design; lack of transparency about cost and quality; and others.

“Given the complexity, interconnectedness and magnitude of the [health care cost] problem, no single legislative initiative will be sufficient,” according to the report. “Further action is needed to slow health care cost growth and ensure the sustainability of our nation’s health care system.”

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