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Improved Diagnosis: Health Care Costs Projected to Increase More Slowly


By: 
Date: December 17 2012

NEW YORK, Dec. 17, 2012 - Projected cost increases for all types of medical plans are anticipated to be down by between 0.2 and 0.6 percent through the first half of 2013, according to a survey by Buck Consultants, A Xerox Company (NYSE: XRX). This year was the first time since 2001 that Buck's survey indicated projected cost increases less than 10 percent for any plan type, a trend that will continue into 2013.

In a national survey of 123 insurers and administrators, Buck measured the projected average annual increase in employer-provided health care benefit costs. Insurers and administrators providing medical trends for the survey cover a total of approximately 109 million people.

In its 25th National Health Care Trend Survey, Buck found costs are projected to increase at rates that are slightly lower than its prior survey.

Type of Plan: Preferred Provider Organization (PPO)
25th Survey: 9.7%
24th Survey: 9.9%

Type of Plan: Point-of-Service (POS)
25th Survey: 9.5%
24th Survey: 9.9%

Type of Plan: Health Maintenance Organization (HMO)
25th Survey: 9.3%
24th Survey: 9.9%

Type of Plan: High Deductible Health Plan (HDHP)
25th Survey: 9.6%
24th Survey: 9.9%

"Despite the lower trend, though, health care costs continue to outpace general inflation - creating difficult business decisions for organizations," said Daniel Levin, FSA, a Buck principal and consulting actuary who directed the survey. "The stubbornly high costs can be attributed to several trends, ranging from a greater use of diagnostic tests and treatments to mandated coverage of certain benefits. Employers need to decide how much of these increases to pass on to workers, or whether to drop coverage and pay the penalties imposed by the Affordable Care Act."

Health insurers reported an average prescription drug trend of 10.1 percent, an increase of .5 percent from the prior survey. It is also more than twice the 4.1 percent reported by pharmacy benefit managers (PBMs) - third-party administrators of prescription drug programs, who generally do not take any underwriting risk. The continued shift to generic drug use is a significant factor in the reduced drug trends shown by PBMs.

For plans that supplement Medicare, health insurers reported a trend of 5.4 percent excluding prescription drug coverage, down from 5.8 percent in the prior survey. This lower trend of Medicare Supplement plans reflects the impact of federal controls on Medicare fees and the lower increases expected in Medicare deductibles and copays.

"Another health care trend we'll be watching is the impact of private health insurance exchanges," said Levin. "It remains to be seen how the development of private exchanges will affect the use of public exchange models, but it could likely impact the projected cost trends we measure in this survey."

The survey also reported trend factors for dental and vision plans.

Health insurers use trend factors to calculate premium rates, and large self-funded employers use these trend factors to budget their future health care costs. In general, trend factors provide for price increases that may result from such variables as inflation, utilization of services, technology, changes in the mix of services, and mandated benefits.

About the Survey
Buck's 25th "National Health Care Trend Survey" is available at no cost to the media by contacting Ed Gadowski at 910-253-9816. It is available to other interested parties for $100 by calling 1-800-887-0509 or visiting www.bucksurveys.com.

About Buck Consultants
Buck Consultants, A Xerox Company, is a leader in human resource and benefits consulting with more than 1,500 professionals worldwide. Founded in 1916 to advise clients in establishing and funding some of the nation's first public and private retirement programs, Buck is an innovator in the areas of retirement benefits, health and welfare programs, talent and human resources solutions, compensation, and employee communication. News and other information about Buck Consultants are available at http://www.buckconsultants.com.

About Xerox
With sales approaching $23 billion, Xerox (NYSE: XRX) is the world's leading enterprise for business process and document management. Its technology, expertise and services enable workplaces - from small businesses to large global enterprises - to simplify the way work gets done so they operate more effectively and focus more on what matters most: their real business. Headquartered in Norwalk, Conn., Xerox offers business process outsourcing and IT outsourcing services, including data processing, healthcare solutions, HR benefits management, finance support, transportation solutions, and customer relationship management services for commercial and government organizations worldwide. The company also provides extensive leading-edge document technology, services, software and genuine Xerox supplies for graphic communication and office printing environments of any size. The 140,000 people of Xerox serve clients in more than 160 countries. For more information, visit http://www.xerox.com, http://news.xerox.com or http://www.realbusiness.com. For investor information, visit http://www.xerox.com/investor.



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