The growth in health care costs has slowed down, but not nearly as much as consumers and policymakers would hope.
A new report authored by Xerox based on a survey of health insurers and benefit managers notes that higher health care costs cause employers to shift more of those costs to employees. The report finds that the cost of private health insurance increased between 7-8 percent last year, based on the type of plan. That is still far greater than the rate of inflation.
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After five years between 2007-11, when the cost of insurance rose by roughly 11 percent annually, the cost increases have gradually declined. Most insurance plans have increased by an average of between 8-9 percent annually since 2012.
The differences in the price trends between various types of private insurance are relatively small. In the past year, for instance, the average cost of PPOs increased by 8 percent, while the cost of HMOs increased 7.1 percent and the cost of high-deductible plans increased 7.4 percent.
Much of the increase was due to a rise in the cost of prescription drugs.
Insurers reported that their prescription drug costs rose by roughly 12 percent last year, about the same increase they saw the previous year. Pharmacy benefit managers reported an increase of less than 8 percent, likely because they do not have underwriting risks.
The only major difference comes from private Medicare plans, which have been far more successful in keeping cost increases small. The cost of supplemental Medicare plans that don't include prescription drugs only rose 4 percent last year, whereas the price of such plans that include prescription drugs rose by 4.6 percent.
In its report, Xerox posits that the slow cost growth for Medicaid and Medicare plans is related to the higher costs for commercial plans. Providers are shifting more costs to commercial plans because they can't coax more money out of the government insurance programs, says the report.
The cost of various types of dental insurance also only grew modestly — between 4 and 5 percent. The cost of vision insurance increased by less than 3 percent.
In a press release accompanying the report, Harvey Sobel, an actuary for Xerox HR Services, said the cost trends, although improving, remain worrisome.
"While it's promising to see a slowing of increases, health care cost increases are still eating into employer revenue and employee paychecks at four and five times the rate of inflation," he said.
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