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Health premium cost trends steady for 2015, but drug costs expected to rise

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Health premium cost trends steady for 2015, but drug costs expected to rise

Employers will likely see a modest reduction in premium costs trend rates for most group health care benefit plans in 2015, but should also expect a sharp increase in prescription drug coverage costs, according to a report by benefits consulting firm Segal Group Inc.

Average health care benefit cost increases for active group and pre-Medicare retiree coverage are projected to range between 6.2% and 10.4% depending on the plan type, reflecting flat-to-moderate reductions in cost trend rates in 2014, according to Segal Group’s 18th annual Health Plan Cost Trend Survey, released Thursday.

Segal’s report also predicts an average 8.6% rise in prescription coverage costs in 2015, compared with an average 6.3% increase in the previous year.

“New specialty drugs coming onto the market and price increases for brand-name drugs are the main forces driving prescription drug plan cost trends,” Edward Kaplan, Segal’s New York-based national health practice leader, said in a statement released on Thursday. “Typically, less than 1% of all prescriptions are specialty drug medications, yet these drugs now account for more than 25% of total prescription drug cost trends. The projected specialty drug/biotech trend rate for 2015 is an exceptionally high 19.4%.”

Segal’s report projects the following trend rate increases for active group and pre-Medicare retiree health care plans in 2015, compared with cost trend rates from the previous year:

Preferred Provider Organizations

2015: 7.8%

2014: 7.9%

Point of Service

2015: 7.5%

2014: 8.4%

Health Management Organizations

2015: 6.2%

2014: 7.2%

High Deductible Health Plans

2015: 8.3%

2014: 7.9%

Fee-for-Service/Indemnity Plans

2015: 10.4%

2014: 10.4%

Prescription Drug Carve-Out

2015: 8.6%

2014: 6.3%

Segal’s report noted that the trend rate increases projected for 2015 include the assumed cost of compliance with caps on out-of-pocket expenses implemented under the Patient Protection and Affordable Care Act. The report said the caps are expected to drive a 1% increase in medical benefit costs and a 1.5% increase in prescription drug coverage costs.

“Sponsors of large group plans must stay focused on exploring health plan strategies that produce high value medical benefits with stable cost trends,” Mr. Kaplan said. “This will help avoid future excise taxes.”

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