Health care costs expected to rise between 5% and 6.5% next year

Employer sponsored health care plans will cost about 6.5% more next year, with health care expenditures reaching a point of equilibrium after several years of nearly double-digit growth, according to a study by PricewaterhouseCoopers (PwC).

PwC noted in the report that while costs have tempered from 9% gains in 2011 they remain a stretch for many consumers and employers that have pushed deductibles higher and abandoned prescription co-pay in order to keep premiums affordable.

The study found 25% of surveyed employees already offer only high-deductible health plans and another 39% are considering making the move to only high-deductible plans in the next three years. This shifts more cost to employees and is unsustainable, according to local health care providers. Mercy Health has said higher deductibles mean patients often put off procedures they may need. When treatment is imperative consumers then rely on charity programs or are forced to finance the deductible over 1 to 2 years, which is unsustainable.

More than one-third of employers in the PwC survey are considering a defined contribution strategy. This type of offering sets aside money for each employee to pay for their health care, and if the premium exceeds the employer’s allotted per-person sum, that employee picks up the remainder of the cost. PwC said about 12% of the employers in the survey have already moved to the defined-benefit strategy.

PwC looked at two factors driving health care costs higher: the price for services and drugs, and  utilization, or how many times the services are used. The survey found utilization is having the larger impact on the rising health care costs.

Better access to care is part of the reason for the increased utilization with community health expansions underway across the country. In Northwest Arkansas, all of the health care providers have announced expansion plans, added clinics and more local access, The Community Clinic which seeks underinsured, lower income families opened its 14th location in Northwest Arkansas earlier this year in south Fayetteville. These community clinics see more than 35,000 patients annually, patients that might typically fall through the cracks.

Mercy Health announced in April plans to build four new clinics with three additional clinics planned for the future as part of its $247 million expansion plan over five years. Northwest Health is slated to open a new clinic in Springdale before by year-end on the heels of clinic expansions in Fayetteville and Rogers and the addition of an Obstetrics Emergency Room service at its Willow Creek facility in Johnson. Washington Regional Hospital also just completed a $60 million addition which included additional clinic space.

SPECIALTY DRUG COSTS
A separate study by the National Business Group on Health also predicts a 6% uptick in health costs next year. The Large Employers 2017 Health Plan Design Survey looked at employee costs in 2017 compared to 2016.

“Controlling health benefits costs remains a high priority for large employers,” said Brian Marcotte, president and CEO of the National Business Group on Health. “While employers have been able to keep increases in check for the past few years, costs are still running at more than twice the rate of inflation and general wage increases, thereby threatening affordability. These cost increases, while stable, are both unsustainable and unacceptable.”

According to the NBG survey, the 6% increase employers project for 2017 is identical to the increase they would have experienced in each of the past two years had they not made changes to their plan design. However, many employers expect to hold increases to 5% by making changes to their plans. The survey is based on responses from 133 large U.S. employers offering coverage to more than 15 million Americans.

“Current estimates have health insurance premiums for the average public exchange plan increasing by at least 10%, about twice what large employers are projecting for next year. This is a clear indication that the employer-based health care model continues to be the most effective way to provide health insurance coverage to employees and their families,” said Marcotte.

He said spending on pharmaceuticals and specialty drugs help fuel the higher benefit costs. For the first time in the survey, most employers now consider specialty pharmacy the highest driver of health costs and are taking steps to curb them. According to the survey 31% indicated specialty pharmacy was the highest driver of health costs. That compares with only 6% who cited it as the number one driver in 2014. Overall, 80% of employers placed specialty pharmacy as one of the top three highest cost drivers, followed by high cost claimants (73%) and specific diseases and conditions (61%).

OTHER TRENDS
• 90% of employers will make telehealth services available to employees in states where it is allowed next year, up from 70% this year. By 2020, virtually all large employer respondents will offer telemedicine. Utilization by employees remains low, but is increasing.

• 84% of employers will offer Consumer-Directed Health Plans (CDHPs) in 2017, up from 83% this year. In addition 35% will only offer CDHPs to employees in 2017, a slight increase from 33% this year.

• 33% of employers will have spousal surcharges for insurance privileges in 2017, roughly the same as this year. A few more employers will exclude spouses when other coverage is available through employer.

• 85% of employers will expand options at Centers of Excellence in 2017,  up from 79% this year. The largest increases will be for bariatric surgery up 15%, transplants and fertility treatments, each up 8%.