2011 Segal Health Plan Cost Trend Survey

Abstract

Most benefit plan cost trend rates for 2011 will remain unchanged from 2010, according to forecasts compiled in the 2011 Segal Health Plan Cost Trend Survey, The Segal Company's fourteenth annual survey of managed care organizations, health insurers, pharmacy benefit managers and third party administrators. Trend forecasts for 2011 preferred provider organizations (PPOs)/point-of-service (POS) plans are slightly higher than last year: 0.6 percentage points for those that require referrals by primary care physicians for specialty services (gatekeeper feature). High-deductible health plans (HDHPs) and indemnity plans are expected to see slightly lower cost trends in 2011. The projected trends for 2011 reflect the additional expected costs plan sponsors face to comply with the Affordable Care Act, the health care reform law enacted in 2010.

Trend is a forecast of per capita claims cost 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 and changes in plan design and participant contributions.

The 2011 Segal Health Plan Cost Trend Survey examines trend ranges, trends for active participants and retirees, trend components and the accuracy of trend projections.

Other notable findings from the survey include:

  • All 2011 medical plan types are projected to experience cost trends that are more than eight times higher than the consumer price index for all urban consumers. Projected trend rates for PPOs and POS plans combined show regional variations.
  • Prescription drug trends (for retail and mail order combined), which have remained below 10 percent for the last three years, are forecasted at 9.2 percent for active participants and early retirees.
  • Price inflation for inpatient hospital stays is the largest component of overall plan cost trend.

In addition to compiling forecasted trend rates, the survey looks at historical trend rates. After several years of declining trends, it appears that 2008 was the bottom of a downward pattern, with cost trend rates returning to an upward direction beginning in 2009.

The report also discusses strategies for managing health care costs and notes that plan sponsors will need to address new rules and requirements as mandated under the Affordable Care Act. A brief summary of how plans are responding to certain provisions of the Affordable Care Act is provided.

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