2013 Segal Health Plan Cost Trend Survey
Health benefit plan cost trend rates for 2013 are expected to decline to the lowest level in 11 years of trend forecasts, with most medical and all prescription drug projected trends dipping into single digits, according to the data compiled in the 2013 Segal Health Plan Cost Trend Survey, The Segal Company's sixteenth 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:
- Almost all medical plan types are expected to experience trend increases under 10 percent (with the exception of fee-for-service/indemnity plans). All managed care cost trends are forecast to be in the single digits.
- Trends for health maintenance organizations (HMOs), preferred provider organizations (PPOs)/point-of-service (POS) plans are projected to be approximately 1 percentage point or more 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 10 years ago.
The survey also examined 2013 projected medical trends by service type (hospitals, physicians and prescription drugs). Price inflation is the biggest element of cost increases.
In addition to compiling forecasted trend rates, this survey examines the accuracy of 2011 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 projected impact of the Affordable Care Act on health benefit offerings. In the short term, the law is expected to increase costs of plans sponsors by only a minimal amount. The vast majority of survey respondents (86 percent) indicated that the cost impact on 2012 plan trend of implementing the law's preventive care coverage requirements for plans that lost "grandfathered" status was 2 percent or less. Given that the Affordable Care Act will not lower health care costs or inflation in the short term, programs for sponsors relevant to reducing the cost of care and the prevalence and severity of disease are also highlighted.