The past five years have been stable for health insurance costs. With the exception of those plans hit by extraordinary large claims, premium increases driven by low medical cost trends have been relatively small as compared with the double-digit increases of the previous 15 years. As a result (at least in the employer market) plan changes have not been as severe as in the past and some employers have even improved benefit levels. In addition, increases to employee contributions have also been held in check by increasing profits overall and by a higher level of competition for quality employees.
Recently, Modern Healthcare magazine reported that the Consumer Price Index for health insurance in April 2019 reached its highest level in 5 years at 10.7% annually – this, despite a more modest increase in health expenditures of .4% for professional services and 1.4% for hospital charges. Health insurance premiums are driven by the insurance carrier’s expectation of cost trends, and to a great extent competition within each market. While profitability is checked by ACA medical loss ratio (MLR) mandates, the higher premium increase is concerning in a very fragile marketplace.
I wouldn’t expect employers to resume their pattern of worsening benefits and increasing contributions to offset larger increases in healthcare costs. Instead, I would envision continued movement to alternative funding and a focus on shifting employees to high performance networks to control costs. There is other low-hanging fruit which is creeping into the mainstream: capitating direct primary care, using reference-based pricing on high-cost radiology, and infusions and steering employees to lower-cost settings. And the whole arena of pharmacy pricing opens up cost containment opportunities which are becoming available to even smaller employers.
It’s once again becoming a great time to be a benefits consultant.