2012 Healthcare Trend Results
The 2012 Segal Health Plan Cost Trend Survey charts healthcare trends year over year and is a useful resource in analyzing patterns in healthcare trends as it applies to health insurance costs. Below is a summary of findings.
What Is Healthcare Trend?
Healthcare trend is a forecast of per capita claims cost increase that takes into account various factors such as:
- Price Inflation
- Utilization of services
- Government mandated benefits
- New treatments, therapies and technologies
Healthcare trend can vary by insurance carrier by medical insurance products that they sell. Usually products with a higher level of managed care, or more cost-sharing, will have lower trend numbers. Though there is usually a high correlation between healthcare trend and the actual cost increase of a plan issued by the insurance carrier, the two numbers are not the same.
Changes in health insurance premium cost can vary depending on the specifics of a given group, for example; demographics, changes in plan design, administrative fees, reinsurance premium and changes in participant contributions. However, healthcare trend for a given product in a given area is always factored into the renewal calculation. The chart below shows healthcare trend by product over the past two years:
|Open Access PPO/POS||10.7%||9.5%|
|PPO & POS||10.8%||9.8%|
Factors Driving Trend:
Healthcare trend for 2012 is projected to decline from last year, though the numbers are still significant as they relate to an increase health insurance costs:
- Hospital Trend: 10.1%
- Physician Trend: 8.7%
- Trend: 7.2%
Price inflation for medical services and supplies makes up the majority of the projected healthcare trend percentage. In fact in 2012 “price inflation” is expected to account for over 70% of hospital cost trends and 76% of prescription drug cost trend. Hospital cost trends are expected to exceed all other elements of medical benefit services. Price inflation for physician services is expected to increase by 1.5%, even though overall physician utilization is expected to decrease (behavior that is perhaps indicative of consumers being thrifty in a down economy).
Trend figures for prescription drugs are largely influenced by the emergence of specialty/biotech drugs, or follow-on biologics. The trend rate for specialty/biotech drugs is expected to be 15.5%, which, while still high, is 1.9% lower than last year.
Specialty drug trend is expected to be twice what the aggregate prescription drug trend is, and will continue to drive Rx costs up because as new specialty drugs are released, existing drugs continue to gain new therapeutic uses which will cause overall utilization to rise.
The chart below shows the breakdown of the factors that drive healthcare trend over the past two years:
|Total Trend||12.0%||10.1%||8.2%||8.7%||no data||7.20%|
PPACA’s Impact on Healthcare Trend:
Finally, the plan changes mandated by PPACA are likely to have a ripple effect on healthcare trend. Specifically, the new rules and requirements for group health plans that are most likely to cause an uptick in healthcare trend percentages are as follows:
- Removal of annual and lifetime dollar limits
- Expansion of adult dependent children to age 26
- New fees for comparative effectiveness research
- New taxes on insured policies and medical device makers that will be passed on in premiums
- Coverage of preventive care services with no member cost share
- Reducing waiting periods to a maximum of 90 days
- Added administrative costs on plan sponsors that will increase costs (special enrollments and disclosures)
- Ramifications of the Medical Loss Ratio requirements
For more information about current healthcare trend and how it applies to your health plan, please contact your Client Executive at WGA.
Source: 2012 Segal Health Plan Cost Trend Survey