Segal is a significant second-tier benefits consulting firm and its Sibson Consulting group releases results of a survey on the 2016 medical trend for employer-based health plans. (Segal Survey) For most plan types, large medical trend increases are anticipated, from a 9.9% increase for pure fee-for-service indemnity plans to 6.8% for HMO plans. The most common plan, an open access PPO or point-of-service plan, is projected to see a 7.8% rise, which interestingly is slight less than the increase for primary care gatekeeper PPOs, at 8%. In all cases the rate of growth is close to that experienced for 2015. Geographically, for a PPO plan the Midwest has the lowest trend at 6.1%, while the west is highest at 9.8%. Plans for retirees over 65 are expected to see lower trend growth, in the range of 3% to 3.5%. As we have repeatedly seen, a significant factor in these increases is drug spending–drug carve out plans are forecasting an 11.3% rise, while specialty cost are projected to grow 18.9%. Most of this growth is unit price-related, very modest utilization increases are anticipated. Similar while hospital trend is 8.2%, 6.8% of that is price increases. Dental and vision plans have much lower rates of growth than medical benefits do, around 3% to 4%. Top strategies implemented by respondents in 2015 included narrow networks, use of value-based providers, wellness incentives and emphasizing lower unit cost providers, like onsite or retail clinics and telemedicine. While being used more, the respondents indicated that narrow network plans would likely have little impact on trend, with only 20% believing they will lower it.
An analysis of past survey results led Sibson/Segal to conclude that respondents tend to project higher trends than actually occur, sometimes by 3%, but because the projected trend does not consider the impact of benefit changes employers make, changes that usually mean less choice and more cost-sharing for members, it is not necessarily overstated if those benefit changes had not been made. The survey report, points out, as we often do, that this increase in medical costs, which ends up being reflected in premiums, is several times the average wage growth workers are experiencing. We are in an era in which medical costs may not be wildly accelerating, but are increasing at a very unhealthy clip, one which dings workers the most. And unit price growth appears to be the major factor. It is also not clear that the tactics being used by employers to rein in medical costs are working particularly well.