2012 Segal Health Plan Cost Trend Survey (Multiemployer)

Abstract

For 2012, medical and prescription drug plan cost trend rates are projected to decline from levels forecast for 2011, according to data compiled in the 2012 Segal Health Plan Cost Trend Survey, The Segal Company's fifteenth annual survey of managed care organizations, health insurers, pharmacy benefit managers and third-party administrators. The Segal Health Plan Cost Trend Survey examines trends for active participants and retirees.

Trend is a forecast of per capita claims cost increases that takes into account various factors, such as price inflation, utilization, government-mandated benefits, and new treatments, therapies and technology. Although there is usually a high correlation between a trend rate and the actual cost increase assessed by a carrier, trend and the net annual change in plan costs are not the same. Changes in the costs to plan sponsors can be significantly different from projected claims cost trends, reflecting such diverse factors as group demographics, changes in plan design, administrative fees, reinsurance premiums and changes in participant contributions.

Some notable findings on trend projections for 2012 follow:

  • All medical plan types are projected to experience lower cost trends for 2012. Projected managed care cost trends for 2012 range from 9.6 percent to 10.4 percent, compared to projections for 2011 that ranged from 10.2 percent to 11.7 percent.
  • In 2012, prescription drug trends (for retail and mail order combined) are forecast to be 7.2 percent for active participants and early retirees, a decline of 2 percentage points from 2011 projected trend rates.
  • Trend rates for Medicare Advantage health maintenance organizations are expected to decrease to 6.6 percent from the 2011 forecasts of 7.0 percent.

As was the case for the last several years, price inflation for services and supplies continues to be the biggest element of overall medical plan cost trends.

In addition to compiling projected trend rates, the survey looks at historical trend rates. It appears that in 2010 (the most recent full year for which actual data is available), there were significant declines in actual trend rates from the previous year. Actual trends for 2010 were the lowest reported in more than 10 years. The survey found a significant spread between actual and projected 2010 trends.

The survey also asked questions about the Affordable Care Act, the national health care reform law. In the short term, the Affordable Care Act is expected to add to plan sponsors' costs by a minimal amount.

Although health plan cost trends for 2012 are projected to be lower than in recent years, plan sponsors must remain vigilant in their approach to containing health plan costs. The report concludes with an overview of strategies for managing health care costs.

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