Benefit consulting firm Segal Group has issued results from its 18th annual survey of medical cost trend expectations, this time for 2015. (Segal Trend Survey) The projected trend varies depending on the type of plan. For pure HMO designs, it is 6.2%, for the most common PPO plans it is around 7.5% to 7.8%, and for high-deductible plans it is surprisingly at 7.9%. For most designs the 2015 trend is similar to the 2014 one. For prescription drug carve-out coverage, however, there was a significant jump to a forecast of 8.6% growth, suggesting that drugs may be a major factor in combined medical/drug plan trend. The drug trend is driven by specialty drugs, for which spending is expected to grow almost 20%. Dental and vision plans have lower projected increases, around 3% to 5%. Regionally, the south has the lowest trend at 5.8% and the west the highest at 9.2%. Narrow networks were expected to lower trend by 38% of the respondents using them, with the average impact forecast to be a 3.8% reduction. Health reform requirements were projected to increase trend by 1% or more. By service type, hospital trend was projected at 8%, with 3.5% due to increased use and 4.5% to price increases. For physicians, trend will be 6.6%, 2.8% price and 3.4% use growth and for drugs, a whopping 7.5% price increase is projected with 2.5% utilization growth.
Common strategies being used to mitigate spending growth include use of low-cost primary care access, including tele-visits, retail clinics and worksite clinics; reference pricing; value-based contracting; wellness programs and defined contributions. In regard to drugs, medication therapy management, prior authorization and formulary management were listed as common cost control techniques. Employers are also looking at part-time health benefits (see WalMart’s announcement that it is eliminating health benefits for part-timers) and at spousal eligibility. In a very useful part of the report, Segal compares past expectations with actual experience, and most forecasts have been very conservative, with projections exceeding actual experience in 2013, for example, by 3.3% for the most common PPO plans. People clearly keep expecting higher spending growth than is occurring. Of course, as this report also points out, health spending growth in employer-sponsored plans, especially for employees, is much higher than general inflation, GDP growth, or most importantly, wage growth. In recent years health spending trend is 3 to 4 times faster than wage rises. For both employers and employees, health spending increases continue to be a major problem, and contrary to the Administration’s promises, the reform law has not only not reduced that growth, it has added to cost increases.