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

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

Group health plan costs are expected to increase an average of 5.3% this year, up from 4.5% last year, PricewaterhouseCoopers L.L.P. said Tuesday.

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

For example, 44% 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 health care 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, 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.