22 May Health plan costs moderate, but larger increases ahead

Originally posted May 15, 2014 by Dan Cook on www.benefitspro.com.

The rate of employer-provided health care plan costs is either going up or down this year, depending on who you talk to.

Either way, the difference won’t be much. And overall, the news is good: cost hikes are fairly stable.

Towers Watson and Buck Consultants this week each released their own projections for employer health care spending for 2014. Towers Watson surveyed 173 medical carriers from around the globe; Buck got input from 126 carriers and administrators.

Want good news? Look to the Buck survey. It says the rate of increases in all types of health plans will be less in 2014 than in either of the two prior years.

Costs for PPO plans, it said, rose 8.7 percent this year, lower than last year’s 9 percent growth and the 9.2 percent seen in 2012. HDHPs show the biggest decline in cost increases, rising 8.6 percent this year compared to 9.1 percent in 2014. HMO and POS plans fell as well. For plans that supplement Medicare, though, the health-cost hike spiked to 5.5 percent from 4.1 percent last year.

The average prescription-drug cost increase for this year is 9.2 percent, down from 9.9 percent a year ago.

Buck said reduced utilization was cited by some as the primary reason for the decreases.

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

Meanwhile, if you’re a pessimist, Towers Watson is for you.

After two years of 9.1 percent increases, non-U.S. American plans (North American plans outside of the U.S.) are projected to rise in cost by 9.7 percent this year, its respondent said.

Globally, Towers Watson’s survey indicated that employee health benefits costs will increase 8.3 percent this year, compared to 7.9 percent last year and 7.7 percent in 2012.

Further, its respondents expect costs to start to edge up again in the future.

“More than half (55 percent) of insurers in all regions anticipate higher or significantly higher medical trend over the next three years. Asia Pacific insurers are particularly pessimistic, with more than two-thirds (69%) saying they expect medical trend in the next three years to be higher or significantly higher than current rates,” the study said.

“While the cost of providing health care benefits to employees has stabilized over the past few years, controlling rising costs remains a significant concern for employers worldwide,” said Francis Coleman, director, International Consulting, at Towers Watson. “In fact, in all regions, health costs continue to rise at twice the rate of inflation. That’s a major concern for employers, with many insurers projecting costs to again escalate in the coming years.”