PWC, in its 2014 healthcare survey, reports medical inflation at 6.5%, the lowest level in years. Consumerism is working; patients are actually looking at bills and questioning reimbursement. Hospitals and other providers are under intense pressure to control costs. System intermediaries (like brokers and insurance carriers) are being squeezed. Many blockbuster drugs are moving to generic status, holding drug trends to single digits.
So what is happening to rates? The Affordable Care Act is not making insurance more affordable. A recent Morgan Stanley survey reports the largest increase in group rates in the past three years. Analysts conducting the survey found ACA taxes, underwriting rules and selection issues to blame for average increases in excess of 11% in the small group market and 12% in the individual market—and benefit levels continue to erode.
The rates reflect market realities: Providers are consolidating, and without major changes to the healthcare system (ACOs aren’t producing results yet), there is not much more that can be done to squeeze costs. Consumers have been deferring care, and that may mean deferring needed care, increasing future large claims. Biologic drugs are being released in droves, reversing the cost suppression of generic releases.
In the near term, employers and consumers are going to pay more—much more. The cauldron is boiling. Political pressures to react will be getting intense. Our system is going to have to change.