America's Benefit Specialist November 2022

NOTEWORTHY

Chamber-of-Commerce_ESI-White-Pa per_Final.pdf. SURVEY FINDS HEALTH CARE PLAN COSTS EXPERIENCED STEEPEST CLIMB IN A DECADE Healthcare spending in 2021 spiked an average of 14% per covered participant, the highest increase in a decade. The surge was primarily driven by the return of previ ously deferred medical care and the uptick of COVID-19 vaccines and therapeutics, according to data released by benefits and HR consulting firm Segal in its 2023 Health Plan Cost Trend Survey. In the 26th annual survey, respondents reported 2023 trend forecasts as well as actual health cost trends for 2021 for medical, prescription drug, dental and vision coverage, based on group health plan experience. Last year’s medical actual plan cost increase was nearly double the projected rise of 7.7%, a stark contrast to the -2.1% medical trend rate experienced in 2020. This survey of employer-sponsored health plans also not ed that per employee monthly medical claim costs is forecasted to increase at a rate of sev en to eight percent in 2023. The survey found that forecasts for annual prescription drug costs increases are approaching almost 10%. Specialty drug prices, which now account for 55% of pharmacy benefit costs, are projected to increase by 13.5% as more expensive med ications are introduced to the market. “Inflation is at a 40-year high and is expected to drive up medical plan costs in 2023. While the full effect of inflation on health care costs may not yet be realized, it is expected to impact medical trend rates in the next year,” said Eileen Flick, senior vice president, director of health technical ser vices at Segal. “Continued pressures on the healthcare sector related to health profes sional labor supply shortages and demand for greater wage increases, combined with the acceleration of new to market high-cost technologies and treatments, are likely to drive higher health care cost trends in the next several years. Plan sponsors should ex

1.4% from 7.8% reported in the 42nd survey. Notably, this trend-factor slowdown in the current year is impacted by higher-than-nor mal healthcare activity in the prior year, due to pent up demand from COVID. Medicare: The trend factor for plans that supplement Medicare (excluding prescrip tion drugs) was 5.6%, up from 5.0% in the prior year. This follows six consecutive in creases from 3.0% reported in 2018. Respon dents attributed the increase to COVID-19 and unfavorable claim experience. Notably, these trend factors are still lower than trends for plans covering active employees and reflect Medicare’s ability to limit its payment rates to participating providers, rates which “spill over” to Medicare supplement plans. Prescription drugs: Health insurers reported a weighted average prescription drug trend of 8.1%, representing a steady decline from 9.3% in the 41st survey and 8.8% from the 42nd survey. In contrast, the weighted average trend reported by pharmacy benefit managers in creased by 1.3%—from 6.2% to 7.5%. As with medical, some respondents cited COVID-19 as influencing their trend projection. Health insurers use trend factors to cal culate premium rates, and large self-funded employers use trend factors to budget their future healthcare costs. In general, trend factors provide for price increases that may result from such variables as inflation, utili zation of services, technology, and changes in the mix of services. Employers could see premium rate increases that differ from the factors summarized in this report, as the final premium rate increase reflects other factors, such as changes in benefit design and recovery of prior period losses. For more information, visit www.buck.com. CRITICAL ILLNESS INSURANCE MARKET SURVEY RESULTS Gen Re has released results of the U.S. Crit ical Illness Insurance Market Survey. This annual survey covers traditional individual, group/worksite critical illness (CI), and acci dent products. The majority of new CI sales Continued on page 25

pect higher health plan cost increases which put added pressure on overall compensation costs in the near term.” The 2023 Segal Health Plan Cost Trend Survey polled health insurers, managed care organizations, pharmacy benefit managers and third-party administrators. SURVEY SHOWS CONTINUED INCREASES IN HEALTHCARE COSTS FOR EMPLOYER SPONSORED PLANS Buck, an integrated HR, pensions and employee benefits consulting, technology and administration services firm, recently announced findings from its 43rd Nation al Healthcare Trend Survey of nearly 100 health insurers and health plan administra tors covering over 100 million plan partic ipants. The survey identifies trend factors used by health insurers and third-party administrators to project employers’ future healthcare costs. The report found that although healthcare costs continue to increase, the rate of in crease has generally slowed across multiple categories such as medical and prescription drugs. Notably, the impact of the recent increase in prices is not yet reflected in the healthcare trend factors used by insurers to set premium rates. “Healthcare claims spiked in 2021 due to residual demand from COVID,” said Harvey Sobel, FSA, a Buck principal and consulting actuary who directed the survey. “While a temporary reduction in trends is welcome, activity is projected to normalize in 2022. Health plans will be under pressure to increase provider reimbursement rates in reaction to the rise in inflation as their provider contracts come up for renewal.” Medical trends: Health insurers and ad ministrators reported medical trend factors that vary by product, averaging 5.8% to 6.9%. This is down by one to two percentage points from the prior survey, indicting a slower rate of increase in healthcare costs over the prior year. Similarly, the average trend factor for the popular PPO plan was 6.4%, down by

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