Medical trend is decreasing again this year contrary to fears that full implementation of the Affordable Care Act (ACA) would mean higher costs for health insurance premiums for companies providing group plans to their workers. This is good news for employers, but has many wondering how long it will last.
According to PricewaterhouseCooper’s (PwC’s) Heath Research Institute (HRI) report a medical trend of 6.5% is projected for 2014. Over the past 10 years, medical trend has ranged from 9% to 12% yearly, with last year averaging about 7%.
What is Medical Trend
Medical trend can be defined as a projection of the increase in health care costs over the next policy year. Trend forecast usually takes into account factors such as price inflation, utilization, government-mandated benefits, new treatments and deductible leveraging.
Factors Deflating Medical Trend
The slow recovery of the economy is acknowledged as continuing to impact the health sector. People are not spending on healthcare what they have in the past, and they are looking for ways to save money when they do medical care. That’s the first interesting point of the four factors found by the HRI report for the projected decrease in medical trend in 2014.
- Care continues to move outside costly settings such as hospitals to more affordable retail clinics and mobile health. Consumers value the convenience, and costs can be as little as one-third of the bill in a traditional healthcare site.
- Major employers such as Walmart, Boeing, and Lowe’s now contract directly with big-name health systems for costly, complicated procedures such as heart surgery and spinal fusion.
- The federal government’s new readmission penalties take direct aim at waste in the health system, estimated to be as high as 30%.
- Seventeen percent of employers in PwC’s 2013 Touchstone survey today offer a high deductible health plan as the only option for employees. And more than 44% are considering offering it as the only option.
The decrease seems to be the result of changing behaviors by employers and employees. More employers are looking for ways to reduce costs. Clinics, have the potential to provide access to care at much more affordable rates than hospitals and other private physician settings. For example, an occupational clinic can help employers reduce absenteeism, increase productivity through changing employees behaviors and provide drug screenings, a highly qualified staff and be easily accessible.
High deductible health plans are also being implemented more by employers and making employees more cost-conscious about their health care decisions. If their employer is contracted with a clinic for certain services, especially those for work-related injury means their health plan deductible does not need to be met first and their road to recovery will be quicker.
It will be interesting to see how healthcare reform policies continue to impact medical trend in the years to come and if these historic “lows” will tend to tick upwards in the near future. Those employers that seek out cost-saving programs will be ahead of the curve.