2014 Segal Health Plan Cost Trend Survey

Abstract

Health benefit plan cost trend rates show the slowest growth in 14 years of trend forecasts, according to data compiled in the 2014 Segal Health Plan Cost Trend Survey, Segal Consulting's seventeenth annual survey of managed care organizations, health insurers, pharmacy benefit managers and third-party administrators. 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.

Notable findings from the survey include the following:

  • All medical plan types are projected to experience trend rate declines in 2014.
  • Health maintenance organization (HMO) trend rate projections for 2014 are a full percentage point lower than HMO projections from 2010.
  • Prescription drug benefit trends for retail and mail order combined are forecasted at 6.3 percent for active participants and early retirees. These projections are relatively consistent with last year's trend rate projections of 6.4 percent.

The survey also examined 2014 projected medical trends by service type (hospitals, physicians and prescription drugs). Similar to prior-year projections, price inflation remains the largest component of cost increases.

In addition to compiling forecasted trend rates, this survey examines the accuracy of 2012 projections, noting that the accuracy of trend assumptions, subject to both underwriters' conservatism in predicting future events and a natural lag in the underwriting cycle, is best measured by comparing projected trend to actual trend over multiple years.

The report also examines the expected impact of the Affordable Care Act on health benefit costs. Nearly two-thirds of respondents project a cost increase of 1 percent or less due to loss of "grandfathered" status, with another quarter of the respondents predicting the loss of grandfathered status will be cost neutral.

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