Employees will be experiencing higher co-pays and deductibles in their health insurance next year as employers continue to reduce their overall coverage to deal with rapidly rising costs. A new survey of 1,700 firms in 30 industries from PwC (PriceWaterhouseCoopers) released Wednesday showed that this year’s health care claims are running slightly ahead of a year ago. As the recession-driven slowdown in discretionary health care spending began to abate, claims rose 8.0 percent compared to 7.5 percent in 2010. The projected increase for next year is 8.5 percent, the survey showed.
The health insurance premiums employers paid for their workers in 2010 stood at $13,770 for family coverage and $5049 for individuals, according to the Kaiser Family Foundation’s latest annual survey, which covers over 3,000 employers. The reported increase of 5 percent over 2009, while the smallest in a decade largely due to the recession, left employers paying premiums that were more than double what they paid in 2000.
Employer costs, however, will only go up 7 percent on average. “The medical trend does not take into account changes in benefit design, such as changes in cost-sharing,” the report said. “Typically these changes reduce the trend by 1.5 to 2 percentage points” by shifting more costs onto workers and their families.
A growing number of employers are turning to high-deductible plans in order to lower costs, said Michael Thompson, a principal in PwC’s health care practice said. In 2011, 17 percent of the employers surveyed by PriceWaterhouse offered high-deductible plans as their most common benefit plan compared to just 13 percent in 2010.
If the trend continues, high-deductible plans, often coupled with health savings accounts, could become the most prevalent form of private sector health insurance by 2014. “There are employers who offer high-deductible plans as their only option; some offer it as an option, but an increasing number of employees are choosing that option to lower their own costs; and some employers are offering high-deductible plans with a health savings account, where employees can manage their own spending,” he said. “It’s to facilitate making employees more engaged and aware of the costs of health care.”
Another tactic that shifts costs onto employees is increasing the penalties for going out of network when selecting physicians or hospitals. “In some markets, payers are becoming more selective about who’s in the network,” the report noted.
The survey respondents, which also included executives as insurance firms that cover an estimated 70 million lives, identified three major trends that are driving costs higher in 2012. First, more physicians and hospitals, encouraged by the health care reform law, are merging to promote efficiency and reduce costs over the long-term. The result in the short-run, however, will be an uptick in rates, the report suggested.
“Health plans and providers are always working at the bargaining table over what’s fair year to year,” PwC’s Thompson said. “As providers have consolidated, they certainly have a stronger hand at that table.”
Insurers that cover private-sector workers and their families will also face increased costs to cover shortfalls in hospital payments by Medicare and Medicaid. “The increase in Medicare in-patient hospital rates is expected to be 3.3 percentage points below the expected growth in their costs,” the PwC analysis said.
And employers and health plans reported that post-recession stress was taking its toll on workers’ health, which is increasing the frequency of claims. Medical utilization is also rising because workers who deferred health care during the recession are returning to more normal patterns of visiting their doctors or dealing with non-emergency situations.
On a positive note, drug cost increases for health insurers and individuals should ease somewhat in 2012, the report suggested. The number of blockbuster brand-name drugs coming off patent will be the largest in history, leading to greater use of less costly generics.