September 10, 2015

2016 Segal Health Plan Cost Trend Survey

Abstract

The following are among the key survey findings:

  • Trend rates for prescription drug coverage are projected to increase substantially to double-digit rates: 11.3 percent for prescription drug carve-out coverage for actives and retirees under age 65 (up from 8.6 percent projected for 2015) and 10.9 percent for retirees age 65 and older (up from 7.5 percent projected for 2015).
  • The projected specialty drug/biotech drug trend rate for 2016, is projected to be 18.9 percent, and is expected to be a leading driver of plan cost increases for many of our clients.
  • The most common medical plan types offered to actives and retirees under age 65 — open-access preferred provider organization (PPO)/point-of-service (POS) plans and health maintenance organizations (HMOs) — are projected to vary by 1 percentage point: 7.8 percent and 6.8 percent, respectively.
  • Medical trends for retirees age 65 and older are projected to be much lower than active employee health plan cost rends with less of a differential between plan type offerings: 2.9 percent for Medicare Advantage (MA) PPOs and 3.5 percent for MA HMOs.

It is important to keep in mind that medical health plan cost trends still dramatically outpace the consumer price index for all urban consumers (CPI-U). As long as medical plan trend continues to be substantially above core CPI (which is used to increase the Affordable Care Act’s 40 percent excise tax threshold), a growing number of health plan sponsors will likely exceed the Affordable Care Act’s excise tax threshold in the years ahead. Consequently, plan sponsors will need to continue to focus their efforts to decrease health care spending before the excise tax on high-cost health plans goes into effect in 2018. It is important to make projections now to determine whether (or when) a plan will be subject to the excise tax in 2018 and beyond.