Health care costs increasing at slower rate for employer-sponsored plans, says survey

Although health care costs continue to increase, the rate of increase has generally slowed across multiple categories — including medical and prescription drugs. That’s one big takeaway from the 43rd National Healthcare Trend Survey sponsored by Buck, an integrated human resources, pensions, and employee benefits consulting, technology, and administration services firm. The survey of nearly 100 health insurers and health plan administrators covering more than 100 million plan participants identifies trend factors used by health insurers and third-party administrators to project employers’ future health care costs.

Health insurers use trend factors to calculate premium rates, and large self-funded employers use trend factors to budget their future health care costs. In general, trend factors provide for price increases that may result from such variables as inflation, utilization of services, technology, and changes in the mix of services. (It’s worth noting that the impact of the recent increase in prices is not yet reflected in the health care trend factors used by insurers to set premium rates.)

Health insurers and administrators reported medical trend factors that vary by product, averaging 5.8% to 6.9%. This is down by one to two percentage points from the prior survey, indicating a slower rate of increase in health care costs over the prior year. Similarly, the average trend factor for the popular Preferred Provider Organization (PPO) plan was 6.4%, down by 1.4% from 7.8% reported in the 42nd National Healthcare Trend Survey. Notably, this trend-factor slowdown in the current year is impacted by higher-than-normal health care activity in the prior year, due to pent-up demand from COVID, according to researchers.

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“Health care claims spiked in 2021 due to residual demand from COVID,” Harvey Sobel, a Buck principal and consulting actuary who directed the survey, said in a statement. “While a temporary reduction in trends is welcome, activity is projected to normalize in 2022. Health plans will be under pressure to increase provider reimbursement rates in reaction to the rise in inflation as their provider contracts come up for renewal.”

Medicare and prescription drugs

Based on the Buck survey, the trend factor for plans that supplement Medicare (excluding prescription drugs) was 5.6%, up from 5.0% in the prior year. This follows six consecutive increases from 3.0% reported in 2018. Respondents attributed the increase to COVID-19 and unfavorable claim experience. Notably, researchers said, these trend factors are still lower than trends for plans covering active employees and reflect Medicare’s ability to limit its payment rates to participating providers, rates which “spill over” to Medicare supplement plans.

Health insurers also reported a weighted average prescription drug trend of 8.1%, representing a steady decline from 9.3% in the 41st National Healthcare Trend Survey and 8.8% from the 42nd survey. In contrast, the weighted average trend reported by Pharmacy Benefit Managers (PBMs) increased by 1.3% – from 6.2% to 7.5%. Some respondents cited COVID-19 as influencing their trend projection.