Pension & Benefits News Medical cost trend will increase slightly in 2020: PwC
Wednesday, July 10, 2019

Medical cost trend will increase slightly in 2020: PwC

By Pension and Benefits Editorial Staff

In 2020, PricewaterhouseCooper’s Health Research Institute (HRI) projects that medical costs will increase 6 percent, which is a slight uptick over the past two years. The report, Medical cost trend: Behind the numbers 2020, noted that after figuring in health plan changes, such as increased employee cost sharing and network and benefit changes, medical costs will experience a net growth rate of 5 percent.

Even with employers’ actions, market forces likely will still overrun efforts to quell them, HRI noted. Prices—not utilization—are continuing to fuel health care spending. Utilization continues to be dampened by high deductibles and other cost sharing, but at the expense of employee satisfaction. In response, employers are inserting themselves more forcefully into the healthcare delivery equation.

“Employers are pursuing market-based solutions to the price issue,” said Michael Thompson, president and CEO of the Washington, DC-based National Alliance of Healthcare Purchaser Coalitions, in an interview with HRI. “If market-based solutions don’t work, employers may push for health care to be regulated like a public utility.”

The survey found the following trends:

  • Drug spending. Between 2020 and 2027, retail drug spending under private health insurance is projected to increase at a rate of 3 percent to 6 percent a year as the impact of generics on spending plateaus, biosimilars continue to see slow uptake and new costly therapies enter the market.
  • Chronic diseases. Sixty percent of adults have a chronic disease, with 40 percent managing two or more, the report noted. For employers, per capita health spending on an individual with a complex chronic illness is eight times that of a healthy individual.
  • Greater access to mental health services. Nearly 75 percent of employers offer mental health disease management programs. Anytime access is expanded, costs will go up in the short term. But in the long term, employers may find that addressing mental health is a powerful deflator of medical cost trend.
  • Worksite clinics. Thirty-eight percent of large employers offered a worksite clinic in 2019, up from 27 percent in 2014. These clinics also are expanding the services they offer to include primary care and other services.
  • Benefit package design. More than 80 percent of consumers surveyed by HRI with employer-based insurance said they would be interested in a “menu” of options for care across virtual and physical settings. In 2020, more employers will try to improve communication to help employees navigate the system and make the most of their benefits, aiming for an experience that is more seamless with the rest of the traditional health plan networks.


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