Segal sees little change in plan cost trends

Success is relative. Health care costs may have actually decreased year to year during the Great Depression, when deflation was the scourge for a time, but since our records don’t go back that far, it is impossible to say for certain. This year, the rate of increase has slowed, according Segal, the consulting company. That’s better than having the rate accelerate, but nobody’s breaking out the champagne.

“Medical directors can clearly take away from this study that a lot of their employer clients are holding health plans accountable,” says Eileen Flick, vice president and director of Segal’s health technical systems.

Prescription drug prices seem to be holding steady; that is, they are expected to increase in 2010 at about the same rate that they increased in 2009.

“Drug spending by third party payers has flattened out the last few years and the trend rate is in the low single digits mostly due to generic drug pressure,” says Tim Sawyers, RPh, a member of MANAGED CARE’s editorial board. “However, pharma drug prices for the heavily promoted drugs continue to grow at three to four times the Consumer Price Index. With losses to generics, slowing drug pipelines, less innovative drugs, and the pressure on health plan formularies to limit new drug entries to nonformulary status, it’s easy to explain why pharma continues to increase prices on their existing drug portfolios at an alarming rate.”

Meanwhile, the increase in medical costs (includes pharmacy) will be more than four times as great as the annual increase in average hourly earnings and “will stand in sharp contrast to changes in the consumer price index for all urban consumers … which have been relatively flat or negative over the past 12 months,” according to the 2010 Segal Health Plan Cost Trend Survey.

Expect employers to want to see innovative methods to keep costs from going up at an even higher rate, says Flick.

Projected medical and prescription drug spending, 2007-2010

* Plans where the deductible is at least the minimum health savings account level required by the Internal Revenue Service ($1,200 single, $2,400 family in 2010).

** In 2010, prescription drug carve-out data were captured for retail and mail order combined.

Source: 2010 Segal Health Plan Trend Survey

PPOs/POS plans (with primary care gatekeepers)

Prescription drug trend (mail order)**

Fee for service/indemnity

High-deductible health plans*

Prescription drug trend (retail)

Open-access PPOs/POS plans


MANAGED CARE December 2009. ©MediMedia USA

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