With health care costs well on track to increase by 10.5 percent in the coming year, LIUNA’s health and welfare funds and signatory employers face increased challenges to continue to provide affordable health care for Laborers and their families. The prospect will be particularly daunting for industries like construction, which has been heavily impacted by the recession according to the recently-released 2011 Segal Health Plan Cost Trend Survey. This survey projects the change in health plans’ per-capita claims costs determined by insurance carriers, managed care organizations, pharmacy benefit managers and third-party administrators.

Reflecting the additional costs plan sponsors face as they take measures to comply with the Patient Protection and Affordable Care Act (PPACA) and price inflation for services and supplies, medical plans in 2011 are expected to experience cost trends that are more than eight times higher than the consumer price index which was 1.8 percent as of July 2010.

Medical and prescription drug cost trend rates are expected to remain relatively unchanged from current levels. Price increases for inpatient hospital stays are the single largest factor of overall plan cost trend.

To offset the projected cost increases while, at the same time, improving the health and well-being of plan participants, plan sponsors are considering implementing the following strategies:

  • Adopting designs that generate wider use of generic drugs, eliminate waste and take advantage of step therapy programs that can lower net Rx costs.
  • Engaging in aggressive network hospital negotiations to keep cost payment increases reasonable.
  • Implementing smarter design rules to reduce ER visits and overuse of CT and MRI scans as well as making better use of non-physician services (for example, visiting other qualified primary care providers such as nurse practitioners).
  • Looking into controlled preventive, wellness and on-site clinic delivery systems that move away from fee-for-service contracts.
  • Mining medical data to determine where the key cost drivers are and creating meaningful incentives and support services to encourage members to engage in healthy behaviors and improve their health status.

The Segal Company is an independent consulting firm specializing in benefits compensation and human resources.  It conducts an annual health plan cost trend survey.

Complete survey results are here.

An on-line supplement showing selected annual and projected trend data from the last ten surveys and a second graph of selected medical trends for actives and retirees under age 65 is here.

[Janet Lubman Rathner]