Slower Increases in Health Benefit Costs for 2014

By Stephen Miller, CEBS May 16, 2014
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Health care plan costs are projected to rise more slowly in 2014 than in previous years, according to a survey by Buck Consultants. This continues the favorable trend of declining rate hikes since 2010, although health plan costs still outpace inflation and wage growth.

In a national survey of 126 insurers and administrators, Buck measured the projected average annual increase in employer-provided health benefit costs. Insurers and administrators providing medical cost trend data for the survey cover a total of approximately 119 million people.

In its 2014 National Health Care Trend Survey, Buck found costs are projected to increase at rates that are lower than its recent prior surveys, as shown in the following chart.​

Type of Plan

Annual Health Care Cost Increase

2014

2013

2012

Preferred provider organization (PPO)

8.7%

9.0%

9.2%

Point-of-service (POS) plan

8.5%

8.8%

9.0%

Health maintenance organization (HMO)

8.6%

8.7%

8.8%

High-deductible healthplan (HDHP)

8.6%

9.1%

9.1%

Source: Buck Consultants.

Some survey respondents cited reduced use of health services as the primary reason for the decrease.

“This may be a result of the economic slowdown and its impact on consumers’ willingness to seek medical treatment,” said Harvey Sobel, a Buck principal who co-authored the survey. “Even though the decline is good news, most plan sponsors still find 8-9 percent cost increases unsustainable.”

Health insurers project an average prescription drug cost increase trend of 9.2 percent in 2014, down 0.7 percent from the prior year’s survey.

“It’s too soon to tell the impact of public and private health exchanges on [the cost increase] trend,” said Daniel Levin, a Buck principal and survey co-author. “It may take another few years before we really know if (and by how much) the exchanges will ‘bend’ the cost curve.”

In general, cost trend projections reflect price increases that may result from inflation, use of services, technology, changes in the mix of services, and mandated benefits. Health insurers use cost trends to calculate premium rates, and large self-funded employers use these trend factors to budget their future health care costs.

(click on graph to view larger version)

 

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

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