'We expect to see higher medical trend factors in the future as medical trends have historically outpaced general inflationary increases'
Medical costs for employer-sponsored plans for 2023-2024 are projected to continue to rise, according to a recent report from Buck, an employee benefits consulting firm.
This is the case even though medical trend factors have yet to fully adjust for recent inflationary increases, based on Buck's 44th National Healthcare Trend Survey, which identifies trend factors that are used to project employers' healthcare costs for 2023-2024.
Medical costs vary between 6.2% to 6.8% on average, depending on products. This is the case even though the Preferred Provider Organization (PPO) trend ranges from a low of 0.2% to a high of 11.8%.
The trend factor for plans that supplement Medicare (excluding prescription drugs) dropped to 5.07% from 5.59%, following seven consecutive increases from 3.0% reported in 2018.
"While there has been an uptick in the price of gas, food, and other goods and services as a result of inflation, it does not appear to have yet been generally reflected in the medical trend factors used by insurers to set premium rates," said Harvey Sobel, FSA, a Buck principal and consulting actuary who directed the survey. "As providers renegotiate their fees with insurers, we expect to see higher medical trend factors in the future as medical trends have historically outpaced general inflationary increases."
For fully insured companies that purchase health coverage for their employees, the cost per employee is set to increase 6.5% this year, according to a previous report.
Prescription drugs, dental
Health insurers also report a weighted average prescription drug trend of 9.3%, according to Buck’s survey of close to 100 insurers and/or administrators in December 2022.
Specialty drug utilization, cost and mandated benefits are all driving the increases, according to the report.
Meanwhile, dental insurers report weighted average dental trends ranging from 4.1% for DMOs to 5.6% for scheduled plans.
Negotiated rates with dentists is the reason for their changing trend, whether up or down, according to the report.
More than half (51%) of HR professionals and recruiters say medical/dental coverage is the most effective benefit for attracting new candidates, according to a previous study from Jobvite.
HR and company leaders can play a role in educating employees about rising costs and tips for minimizing expenses, experts say in a previous report from the Society of Human Resource Management.
"It's important that employers get the message out about preventive care," says Kim Buckey, vice president of client services at Optavise, a benefits education, enrollment and health care transparency firm.
"Open communication with employees is key. Few employees understand or make the connection that the medical services they and their colleagues are using directly influence the cost of the health plan," Tim Stawicki, senior director and chief actuary at Willis Towers Watson. "Remind employees of the significant value that employers provide through the health plan. This employer-provided value can run $10,000 or more per enrolled employee, on average."
Here are some cost-saving initiatives that employers anticipated to have the most impact, according to the Health Care Costs Pulse Survey: 2023 Cost Trend, International Foundation of Employee Benefit Plans, which was cited in the SHRM report:
- Purchasing/provider initiatives (telemedicine, price transparency tools, centers of excellence, health care navigators/advocates, coalitions, quality initiatives) (24%).
- Cost-sharing initiatives (deductibles, co-insurance, co-pays, premium contributions) (21%).
- Utilization control initiatives (prior authorization, case management, disease management, nurse advice lines) (13%).
- Plan design initiatives (dependent eligibility audits, high-deductible health plans, wellness initiatives, spousal surcharges/carve-outs) (11%).
- Administration/data analysis initiatives (claims audits, utilization analysis, data warehouse, predictive modeling) (9%).