Segal Consulting surveyed numerous health plans, PBMs, TPAs and others involved in the employer-based health benefits sector to get a read on 2017 health plan medical cost trend. (Segal Brief) The expectations for different plan designs vary, but generally are slightly less than what was projected for 2016. Fee-for-service indemnity plans, as expected, have the highest anticipated trend at 9.1%, followed by high-deductible designs at 7.7%, open access PPO designs at 7.6%, primary care gatekeeper PPOs at 7.5% and HMO or closed network models at 6.7%. Note that as usual these numbers are much larger that general inflation, economic growth or personal income growth. Among this group of respondents, the expectations for wage growth in 2016 was 2.5%. From the employer perspective the trend can be ameliorated by benefit design changes; i.e. higher deductibles and copayments, but that just shifts more cost to employees. Looking at projected trend to actual experienced trend for the last five years indicates that actual trend comes in 1% to 3% lower than originally projected, usually due to benefit design changes.
These trend numbers are for active, under 65 employees, for Medicare-eligible retirees, trend is substantially lower, in the 3-4% range, but expectations for 2017 are higher than for 2016. For prescription drugs specifically, trend is even higher, 11.6% overall for employees under age 65 and for the specialty drug sub-component, 18.7%. Ancillary coverages like dental and vision are showing a much lower trend, at around 2.5% to 4%. There is some regional variation in these medical trend projections. The Northeast is at 7%, the Midwest at 7.4%, the South is 7.9% and the West is a whopping 9.2%. The respondents anticipate that price increases will be responsible for the vast majority of the trend, with very modest utilization growth. Hospital costs and prices are expected to increase more rapidly than those for physician services. Just further verification that 2017 is shaping up to be another painful health spending year for both employers and employees.