Costs for all types of medical plans are expected to increase by 9.9 percent for 2012, the first time in a decade that projected cost increases were less than 10 percent for any type of plan, according to a survey by Buck Consultants.
In its national survey of 129 insurers and administrators, Buck measured the projected average annual increase in employer-provided health care benefit costs. Insurers and administrators providing medical trends for the survey cover a total of roughly 109 million people.
Costs are projected to increase at rates that are more than a full percentage point lower than last year, the survey found.
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"The reduced trend factors reported in our survey reflect that health insurers, who may have previously added margins to account for health care reform benefit changes mandated for 2011, have now removed those margins for 2012 projections," says Daniel Levin, a Buck principal and consulting actuary who directed the survey. "The reduction also reflects lower expected costs as a result of the economic slowdown. Employees are trying to reduce their out-of-pocket expenses and are postponing elective medical services."
He also notes that trends are not varying by plan type as they have in previous surveys, which might indicate insurers don't see network type as a significant reason for modifying trend factors.
Health insurers reported an average prescription drug trend of 9.6 percent, down 1.1 percent from the prior survey. It's also more than twice the 4.6 percent reported by pharmacy benefit managers – third party administrators of prescription drug programs who generally don't take any underwriting risk.
For plans that supplement Medicare, insurers reported a projected increase of 5.8 percent excluding prescription drug coverage, up from 5.3 percent in the prior survey. This lower trend of Medicare Supplement plans reflects the impact of federal controls on Medicare fees and the lower increases expected in Medicare deductibles and copays.
"Despite the lower trend factors found in our survey, health care costs continue to outpace both general inflation and wage increases—creating real business challenges for organizations," Levin says. "We've seen increased interest from plan sponsors for strategies to optimize alternative delivery systems such as exchange models and accountable care organizations."
The survey also reported trend factors for dental and vision plans.
Health insurers use trend factors to calculate premium rates, and large self-funded employers use these trend factors to budget their future health care costs.
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