Group health plan cost increases moderated slightly

Group health care plan costs are expected to increase an average of 5.5% in 2012 and 2013, a slight moderation from prior years as employer actions and health care market developments help hold down those increases, PricewaterhouseCoopers L.L.P. said in an analysis.

Released last week by PwC's Health Research Institute, the analysis says the medical trend—the cost of medical services that insurers assume in setting premiums—will rise an average of 7.5% in 2012 and 2013.

But after employers make design changes, such as increasing plan deductibles, net plan costs are expected to increase only 5.5% this year and next, PwC said.

By contrast, plan costs increased an average of 6% in 2010 and 2011.

“Overall, this is good news,” said Michael Thompson, a PwC principal in New York.

There are several factors behind the moderating increases, PwC says in its analysis. For example, hundreds of retail health care clinics have opened in recent years, giving consumers a less expensive alternative to hospital emergency rooms.

PWC found that nearly 25% of individuals it surveyed used a retail medical clinic in 2011 vs. less than 10% in 2007.

“There is a movement to give people access to care on a more cost-efficient basis,” Mr. Thompson said.

Timing also is a factor. Last year, more than $28 billion in brand name drugs lost their patent protection and just more than $26 billion brand names drugs will see their patents expire this year, allowing the introduction of cheaper generics. PwC estimates that a brand name drug that costs $100 will be available for about $40 as a generic within one to two years after patent protection expires.

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The analysis also found significant growth of high-deductible health plans. Twenty-two percent of employers said their most common plan had an in-network deductible of at least $1,000 in 2012, up from just 7% in 2008.

The growth of high-deductible plans can have positive and negative effects on employers' efforts to control health care costs.

“Some employees are learning to shop around for needed care, while others forgo elective procedures or possibly delay care,” according to the report.

The report also found that spending on physician services, which in 2012 accounted for 32% of group health care spending, grew at an annual rate of 5.4% between 2007 and 2012—the slowest growth rate by spending category.