Health care premiums to jump in 2016Posted On: Jun. 21, 2015 12:00 AM CST
Fueled by an influx of expensive prescription drugs, group health insurance premiums are expected to increase an average of 5% to 8% in 2016.
Rapid employer adoption of high-deductible health plans and telemedicine programs are factors helping to keep premiums from rising further.
Last year, group health plan costs rose an average of 3.9% per employee, according to a Mercer L.L.C. survey of nearly 3,000 employers, the lar-gest of its kind. That compares with a 2.1% average increase in 2013, but was sharply below the 7% average annual increase over the past 15 years.
Employers responding to the Mercer survey predicted plan costs to rise an average of 4.6% per employee this year. A separate Aon Hewitt survey projected costs would increase more than 5% this year.
“We do expect a small increase in 2016 in the 5% range,” said Dianne Howard, director of risk and benefits management at the School District of Palm Beach County in West Palm Beach, Florida. Ms. Howard attributes the school district's ability to keep costs under control “to the different programs we run” such as its outcomes based wellness programs.
For 2016, costs per employee will move, after design changes, 5% to 8% higher, experts say, with expensive specialty drugs as well as sharply rising prices for a wide range of other prescription drugs being the major factors.
“The single largest driver of cost increases are specialty drugs,” said Joe Kra, a Mercer partner and actuary in New York.
One frequently cited example of new and very expensive specialty drugs are those used to treat hepatitis C, a liver disease, whose costs can run into tens of thousands of dollars per patient.
High group health plan costs “are almost entirely due to prescription drugs,” said Ed Kaplan, senior vice president and national health practice leader at Segal Co. in New York. “Top drug manufacturers really are boosting prices across the board.”
For example, more than 500,000 U.S. patients had medication costs in excess of $50,000 in 2014, a 63% jump from the prior year, as doctors prescribed more expensive specialty drugs for diseases such as cancer and hepatitis, according to a survey released earlier this year by prescription benefits manager Express Scripts Inc.
In addition, more employees are expected to use health care services as the economy improves.
“We expect to see an uptick in health care utilization this year, which will influence rates in future years,” said Michael Thompson, a principal at PricewaterhouseCoopers L.L.P. in New York.
Still, no one foresees a return to double-digit cost increases that were typical about a decade ago.
One factor holding down increases has been widespread adoption of consumer-driven health plans, which typically are high-deductible plans linked to health savings accounts. Such plans cost roughly 20% less than traditional health plans, such as preferred provider organization plans.
Twenty-three percent of employees were enrolled in a CDHP last year, up from 18% in 2013 and the largest one-year increase since Mercer began tracking enrollment about a decade ago.
With high employee cost-sharing requirements in CDHPs, “employees become more cost-conscious. They are becoming better health care consumers,” said Segal's Mr. Kaplan.
“When employees have to pay more, it changes how they use health care services,” said Beth Umland, Mercer's director of research for health and benefits in New York.
Instead of going to a hospital emergency room, an individual might go to a less expensive urgent care center, she said.
Other cost controls
Other cost-control efforts include adoption of telemedicine programs. More than one-third of very large employers — those with at least 20,000 employees — offered telemedicine programs last year, up from 18% in 2013. Nearly half were considering adding the programs, according to Mercer.
In such programs, employees are liable for only a copayment, perhaps $40, that is cheaper than a doctor's office visit to speak with a board-certified physician about a medical problem, avoiding a more expensive office visit, or, in some cases, a trip to a hospital emergency room.
“We are seeing very rapid growth in telemedicine,” Ms. Umland said, adding, “There is a whole new world of cost control strategies that does not involve cost-shifting.”
“Employers have plenty of tools to try to control costs,” said Steve Caulk, a Denver-based actuary and vice president at Aon Hewitt.
Plenty of unknowns on the cost-control front remain, though.
One is the impact of possible mergers of the nation's biggest health insurers.
This month alone, rumors flew about potential mergers involving Aetna Inc., Cigna Corp., Humana Inc. and UnitedHealthcare Inc.
“Megamergers gives insurers more clout” when dealing with providers, but they also narrow the universe of insurers from which employers can choose, said Harvey Sobel, a principal and consulting actuary at Buck Consultants at Xerox in Secaucus, New Jersey.
Another unknown: Whether the decrease in the number of uninsured due to the health care reform law will result in hospitals reducing or keeping their charges even to reflect the reduction in uncompensated costs they previously picked up.
“Hopefully, there will be that effect,” said Tom Billet, a senior consultant with Towers Watson & Co. in Stamford, Connecticut.