Group health plan costs to increase 5.3% this year: Survey

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By Jerry Geisel, Crain News Service

CHICAGO (June 25, 2014) — Group health plan costs are expected to increase an average of 5.3 percent this year, up from 4.5 percent last year, PricewaterhouseCoopers L.L.P. (PwC) said June 24.

PwC’s survey of more than 1,200 employers found health plan costs increased — before plan changes — 7.8 percent in 2013 and 8 percent in 2014. But after employers made design changes, such as increasing plan deductibles, net plan costs rose 4.5 percent in 2013 and are expected to increase 5.4 percent in this year.

The growing economy is a key factor in the expected increases.

“As more people become employed, job stability increases a family’s discretionary income and allows family members to return their attention to long-postponed health needs,” PwC said in its analysis.

However, employers continue to take steps to keep plan costs from soaring.

High-deductible offerings growing

For example, 44 percent of surveyed employers said they are considering making a high-deductible plan the only offering to employees within the next three years.

Through greater cost-sharing, health plan enrollees have a strong financial incentive to use healthcare services more carefully, Michael Thompson, a PwC principal in New York, said in an interview.

Another plan design—placing a dollar cap on how much an employer will reimburse plan enrollees for expensive medical procedures—also can change enrollee behavior.

The analysis cites a 2011 action by the California Public Employees’ Retirement Systems (CalPERS), the nation’s second-largest purchaser of health services, in which CalPERS capped reimbursement for hip and knee replacements at $30,000.

Through that step, CalPERS’ enrollees switched to lower-cost hip and knee replacement providers. “In response, other providers dropped their prices to compete, and CalPERS saved $5.5 million in the first year,” according to the PwC analysis.

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This report appeared on businessinsurance.com, the website of Business Insurance magazine, a Chicago-based sister publication of Tire Business.

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