Group health plan costs seen rising 5.4% this year: Analysis

Group health care plan costs are expected to increase an average of 5.4% in 2013 and 4.5% in 2014, 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 Tuesday 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% in 2013 and 6.5% in 2014.

But after employers make design changes, such as increasing plan deductibles, net plan costs are expected to increase only 5.4% this year and 4.5% next year, PwC said.

By contrast, plan costs increased an average of 5.3% in 2012 and 6% in 2011.

One factor holding down plan costs is the shifting of costs to plan enrollees. For example, 56% of employers reported a deductible of at least $500 for in-network services in their health care 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% in 2010.

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.

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A key factor driving the rise in high-deductible plans is a provision in the 2010 health care reform law that will impose a 40% 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 health care reform law already is driving other plan changes. For example, 31% of employers with less than 500 employees now self-insure their health care plans, up from 22% a year earlier.

Under the health care 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 health care reform law provision increases the difference in cost between insuring and self-insuring health care plans, Mr. Thompson said.

The report is available here.