2014 Segal Health Plan Cost Trend Survey Shows Slowest Growth In Trend Rates In 14 Years

New York (10/10/13) —  Health benefit plan cost trend rates show the slowest growth in 14 years of trend forecasts, according to data compiled in the 2014 Segal Health Plan Cost Trend Survey, Segal Consulting’s (www.segalco.com) seventeenth annual survey of health plan cost trends.

Edward A. Kaplan, SVP and Segal’s National Health Practice Leader noted, “While medical and prescription drug trends will decelerate in 2014, overall health plan costs are still on the rise. In response, we are seeing plan sponsors becoming increasingly more progressive and creative in their efforts to manage costs while delivering high-quality health care.”

Key survey findings include:

  • All medical plan types are projected to experience trend rate declines in 2014.
  • Health maintenance organization (HMO) trend rate projections for 2014 (7.0%) are nearly a percentage point lower than HMO projections from 2013 (7.9%).
  • Prescription drug benefit trends for retail and mail order combined are forecasted at 6.3% for active participants and early retirees, relatively consistent with last year’s trend rate projections of 6.4%.

In addition to compiling forecasted trend rates, this survey examines the accuracy of 2012 projections – and an online supplement to the report features a graph that shows selected actual and projected  trend data from the last 13 surveys and another graph of selected medical trends for actives and retirees under age 65.

What is Trend?

Trend is a forecast of per capita claims cost increases 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, changes in plan design, administrative fees, reinsurance premiums and changes in participant contributions.

Impact of losing Grandfathered status under ACA:

The report also studied the expected impact of losing grandfathered status under the Affordable Care Act (ACA) on health benefit costs. Nearly two-thirds of respondents project a cost increase of 1 percent or less due to loss of “grandfathered” status.

Kaplan commented, “Plan sponsors must be ready to implement new requirements introduced by the Affordable Care Act and to determine their impact on plan costs. We have also estimated that the total additional costs to group health plan sponsors to comply with all mandates, fees and new taxes imposed under ACA could be as much as 4%. Plan sponsors will also need to play an active role to continue to get the most for their benefit dollars.”

Segal recommends that plan sponsors focus on:

  • Reviewing plan participant premium contributions strategies to align with provisions under ACA (e.g., to ensure plan passes new affordability tests)
  • Utilizing Patient-Centered Medical Homes (PCMH) and Accountable Care Organizations (ACOs), which focus on primary and preventative care;
  • Exploring ways to move providers to outcome-based compensation;
  • Introducing participants to decision tools that provide more information on health treatment costs; and
  • Encouraging participants to seek care for minor illnesses at lower-cost settings, such as walk-in clinics.

Complete survey results are available here.

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Sibson Consulting (www.sibson.com), a member of The Segal Group, provides strategic human resources solutions to corporate and non-profit employers and professional service firms. Sibson's services include benefits, compensation, talent and performance management, communications, sales force effectiveness and change management. In 2014, The Segal Group is celebrating the 75th anniversary of its founding by Martin E. Segal.