Understanding Trends

Trend is a forecast of per capita claim cost increases that take into account various factors, including price inflation, utilization, government-mandated benefits, and new treatments, therapies and technology. Trend is the estimated increase in future healthcare costs.

Although there may be a high correlation between a trend and the actual cost increase assessed at renewal, trend and the net annual change in plan costs are not necessarily the same.

• Renewals close the gap between health care fees and actual plan costs
• A client can experience a 5% trend and could receive a 10% renewal because health care fees may account for prospective costs that will be incurred in the future (small group claim experience is not credible and has a higher degree of volatility)
• Renewals will vary nationally based on regional pricing variations, state required plan design changes and changes in provider rates

Other factors that impact renewals include, but are not limited to:

• High-cost claims
• High ER usage over other more cost-efficient care when applicable
• Rx specialty drug utilization
• Obtaining services in-network vs. out-of-network

Price Inflation Impacts*

Price inflation could be impacted by:

• Cost drivers: inflationary pressures, healthcare worker staffing challenges, provider consolidation, impact of delayed treatment, pent-up demand and new treatments and technology are pointing to higher medical trend projections during the next few years.
• Hospital cost trend: the prices of goods and services are a more significant factor than higher utilization of services in both hospital and physician trend increases.
• Physician services: Pent-up demand and increased disease severity due to postponement of care contributed to physician utilization trends.
• Specialty Rx: have a higher projected double-digit trend for 2023 at a rate of 13.5% and now account for more than 55% of spending
• Outpatient Rx: projected trend is expected (specialty and non-specialty drugs) to increase from 8.4% to 9.8%, the highest rate observed since 2015.

2023 General Health Care Trend Inflators*

Inflator: Healthcare workforce shortage

Due to the scarcity of nurses and healthcare providers, healthcare organizations have had to offer higher wages to attract talent. This has resulted in increased costs for hospitals, including paying higher rates to contract agencies or traveling nurses to fill the staffing gaps. In addition to rising labor costs, there has also been an increase in the cost of supplies, leading to an inevitable rise in the prices of healthcare services.

Inflator: Rise in outpatient care

The COVID-19 pandemic has expedited the growth of outpatient care, which encompasses telehealth services, urgent care and in-home care. Due to the decline in hospital revenue, healthcare organizations have been compelled to obtain a larger share of the market by acquiring outpatient facilities and physician practices.

Inflator: Hospital Price Transparency

The Hospital Price Transparency rule has been in effect for two years, mandating that hospitals reveal the standard charges for a specified group of services in a format that can be accessed by the public and machines. The aim of transparency is to enable consumers to locate providers that offer services at a lower cost, but the Semi-Annual Hospital Price Transparency Compliance Report indicated that only 16% of hospitals are presently following the rule in its entirety.

Inflator: Specialty drugs

Spending on specialty drugs/biologics is projected to rise by 13.5% in 2023, which is considerably higher than the rate for non-specialty. Specialty drugs now account for more than 55% of healthcare spending, with the increase being fueled by the expansion of autoimmune, oncology and diabetes therapies.

2023 General Health Care Trend Deflators*

Deflator: Healthcare transparency tools

Many vendors provide digital healthcare guide platforms that extend beyond the requirements for transparency. These platforms are designed to help participants make the most of their healthcare benefits by providing patient advocacy services, such as identifying high-quality providers, delivering personalized health recommendations, suggesting preferred provider options and scheduling appointments.

Deflator: Virtual care

Virtual or digital healthcare services have become an essential aspect of healthcare, and their use is likely to continue. Integrating these patient-centered programs into healthcare programs can improve the benefits provided to plan participants and enhance patient engagement and empowerment. As a result, outcomes can improve, and costs can be managed more effectively.

Deflator: Keep copayments low for generic drugs

Providing a plan that features no deductibles and low, fixed dollar copayments for most generic drugs is an appealing and effective approach. Since there is still substantial competition among generic drugs, the annual inflation of generic drug prices is reasonable and does not significantly contribute to the growth of plan costs.

Deflator: Leverage specialty drug copayment
Optimize the benefits of specialty drug copayment assistance programs by adjusting specialty drug tier copayments to capitalize on savings. Implementing this strategy can alleviate some of the financial burden associated with the expensive specialty drug class.

Companies can help bend their cost trends by educating worksite employees on:

• Using telemedicine for non-emergent care
  
  • May include medical, behavioral health and dermatology (varies by carrier)
• Using Rx mail order vs. retail where applicable
• Using healthcare transparency tools for procedures
  • Setting matters and can have a material impact on cost drivers
• Adhering to medications and other prescribed treatments
  • Acute condition flareups that may occur due to failure to take medications timely and properly increases avoidable costs. The top three conditions that have these flareups are*:
    • Asthma
    • Diabetes
    • Coronary Artery Disease

• Getting annual Wellness visits and preventive screenings.
  • Early diagnosis can reduce future costs or prevent catastrophic costs.
• Getting prenatal care: consistent monitoring during pregnancy can potentially reduce maternity costs. Most carriers have specific prenatal programs.

*2023 Segal Health Plan Trend Survey