By Jerry Geisel, Crain News Service
CHICAGO (June 19, 2013) — Group healthcare plan costs are expected to increase an average of 5.4 percent in 2013 and 4.5 percent in 2014.
That's a slight moderation from prior years as employer actions and healthcare market developments help hold down those increases, PricewaterhouseCoopers L.L.P. said in an analysis.
Released June 18 by PwC's Health Research Institute, the analysis says the medical trend—or the cost of medical services that insurers assume in setting premiums—will increase an average of 7.8 percent in 2013 and 6.5 percent in 2014.
But after employers make design changes, such as increasing plan deductibles, net plan costs are expected to increase only 5.4 percent this year and 4.5 percent next year, PwC said.
By contrast, plan costs increased an average of 5.3 percent in 2012 and 6 percent in 2011. One factor holding down plan costs is the shifting of costs to plan enrollees. For example, 56 percent of employers reported a deductible of at least $500 for in-network services in their healthcare plans with the highest enrollment.
At the same time, more employees are opting to enroll in lower-cost plans. Among employers offering high-deductible plans linked to health savings accounts, just more than one-third of employees enrolled in the plans this year compared with about 20 percent in 2010.
Trend to accelerate
And the move to higher-deductible but lower-cost plans is expected to accelerate in the years ahead, noted Michael Thompson, a principal with PricewaterhouseCoopers L.L.P. in New York.
A key factor driving the rise in high-deductible plans is a provision in the 2010 healthcare reform law that will impose a 40-percent excise tax on premium costs that exceed $10,200 for single coverage and $27,500 for family coverage effective in 2018, Mr. Thompson noted.
The healthcare reform law already is driving other plan changes. For example, 31 percent of employers with less than 500 employees now self-insure their healthcare plans, up from 22 percent a year earlier. Under the healthcare reform law, insurers will be assessed billions of dollars in new fees, which they likely will try to pass on to policyholders in the form of higher premiums.
That healthcare reform law provision increases the difference in cost between insuring and self-insuring healthcare plans, Mr. Thompson said. The report is available on PwC's website.
This report appeared in Business Insurance magazine, a Chicago-based sister publication of Tire Business.