Skip to main content

Segal Consulting Cost Trend Report

By January 17, 2018Commentary

Benefit consulting firm Segal Consulting survey over 100 health plans, third-party administrators, PBMs and others about per capita medical cost trend expectations for 2018.   (Segal Report)   These trend expectations are influential in premium rates, benefit design changes and employee cost-sharing decisions.  For high-deductible plans the rate of increase is expected to be 7.8%, versus 7.7% in 2017.  For PPO plans, the expected rate of growth is also 7.8%, versus 7.5% in 2017.  And for HMO-type plans, 2018 is projected at 6.9% rises versus 6.7% in 2017.  All are well above general inflation rates and certainly wage growth.  Projected growth in costs for retirees in Medicare Advantage and MedSupp plans is lower, in the 3% to 4% range.  For drug costs specifically, anticipated increases are lower than in 2017, but significantly higher than overall medical costs.  General outpatient drug cost rises are projected at 10.3% in 2018, compared to 11.6% in 2017; while specialty drugs, an ongoing cost bugaboo, are expected to grow 17.7%.  These increases are continuing to spur health plans and their drug management vendors to find creative strategies to lower prices and utilization.  Prior authorization is spreading as are attempts to mitigate the utilization effects of manufacturer copay coupons and other patient assistance programs.

As with other research, the Segal report finds that most of the source of cost growth is price rises, not utilization.  For hospitals, there is a 4.6% increase attributable to price growth and only 1.5% to more utilization.  For physician services, 2.8% is price and 1.5% use and for drugs, 8.8% is price and only 2.1% utilization.  Actual negotiated contract price increases that many plans have established with their network providers are in the low 2% range.  Keep in mind that projected trends are often lower than actual experience, partly because there are design changes, but also likely because health plans and other vendors to employers are likely trying to set a high bar to make themselves look better on performance.   The list of cost management tactics listed in the Segal report looks similar to those seen elsewhere–use value-based contracts, increase wellness incentives, move to a high-deductible design, use more telehealth, more onsite clinics, narrow networks, and use reference-based pricing.  Despite intensive focus on all these tactics, however, for the private group health insurance market, spending just seems to keep rising much faster than economic growth or general inflation.

Leave a comment