Health Care Costs Continue to Fall, Albeit Slowly

The Buck survey, which also reported trends for dental and vision plans, found costs are projected to increase at rates lower than prior surveys.

Projected cost increases for all types of medical plans are anticipated to continue the slow, steady declines experienced since 2010 by falling between 0.1 and 0.5 percent in 2014, according to a survey by Xerox subsidiary Buck Consultants.

Health insurers reported an average prescription drug trend of 9.2 percent, a decrease of 0.7 percent from the prior survey.

Meanwhile, pharmacy benefit managers, which the report noted do not generally take any underwriting risk, reported a weighted average trend factor of 4.1 percent, which is less than half of the factor reported by health insurers, but still up by 0.3 percent from the 3.8 percent reported in the prior survey.

Overall, the survey, which also reported trend factors for dental and vision plans, found costs for Preferred Provider Organization (PPO), Point of Service (POS), High Deductible Health Plans (HDHPs) and Health Maintenance Organizations (HMOs) are projected to increase at rates that are lower than its recent prior surveys.

"This may be a result of the economic slowdown and its impact on consumers’ willingness to seek medical treatment," Harvey Sobel, FSA, a Buck principal and consulting actuary who co-authored the survey, said in a statement. "Even though the decline is good news, most plan sponsors still find 8-9 percent cost increases unsustainable."

As Sobel indicated, some survey respondents cited reduced utilization as the primary reason for the decrease in costs, which could be caused by uncertain personal financial circumstances.

In general, trend factors provide for price increases that may result from such variables as inflation, utilization of services, technology, changes in the mix of services and mandated benefits.

Health insurers use trend factors to calculate premium rates, and large self-funded employers use these factors to budget their future health care costs.

The national survey of 126 insurers and administrators measured the projected average annual increase in employer-provided health care benefit costs. The insurers and administrators that provided medical trends for the survey cover a total of approximately 119 million people, the report said.

"It’s too soon to tell the impact of public and private health exchanges on trend," Daniel Levin FSA, a Buck principal and consulting actuary and another co-author of the report, said in a statement. "It may take another few years before we really know if (and by how much) the exchanges will 'bend' the cost curve."

The report also revealed that for plans that supplement Medicare, health insurers reported a trend of 5.5 percent excluding prescription drug coverage, up from 4.1 percent in the prior survey.

However, Medicare supplement plans generally have lower trends than other medical plans due to the impact of federal controls on Medicare fees and the smaller increases expected in Medicare deductibles and co-pays, the study pointed out.