Buck Bond Group

Buck survey shows continued increases in healthcare costs for employer-sponsored plans

Survey indicates some reduction in the rate of increase; inflation uptick not yet reflected in premiums

NEW YORK, September 15, 2022 – Buck, an integrated HR, pensions, and employee benefits consulting, technology, and administration services firm, today announced findings from its 43rd National Healthcare Trend Survey of nearly 100 health insurers and health plan administrators covering over 100 million plan participants. The survey identifies trend factors used by health insurers and third-party administrators to project employers’ future healthcare costs.

The report found that although healthcare costs continue to increase, the rate of increase has generally slowed across multiple categories such as medical and prescription drugs. Notably, the impact of the recent increase in prices is not yet reflected in the health care trend factors used by insurers to set premium rates.

“Healthcare claims spiked in 2021 due to residual demand from COVID,” said Harvey Sobel, FSA, a Buck principal and consulting actuary who directed the survey. “While a temporary reduction in trends is welcome, activity is projected to normalize in 2022. Health plans will be under pressure to increase provider reimbursement rates in reaction to the rise in inflation as their provider contracts come up for renewal.”

Key findings:

  • Medical trends: Health insurers and administrators reported medical trend factors that vary by product, averaging 5.8% to 6.9%. This is down by 1-2 percentage points from the prior survey, indicting a slower rate of increase in healthcare costs over the prior year. Similarly, the average trend factor for the popular Preferred Provider Organization (PPO) plan was 6.4%, down by 1.4% from 7.8% reported in the 42nd Notably, this trend-factor slowdown in the current year is impacted by higher-than-normal healthcare activity in the prior year, due to pent up demand from COVID.
  • Medicare: The trend factor for plans that supplement Medicare (excluding prescription drugs) was 5.6%, up from 5.0% in the prior year. This follows 6 consecutive increases from 3.0% reported in 2018. Respondents attributed the increase to COVID-19 and unfavorable claim experience. Notably, these trend factors are still lower than trends for plans covering active employees and reflect Medicare’s ability to limit its payment rates to participating providers, rates which “spill over” to Medicare supplement plans.
  • Prescription drugs: Health insurers reported a weighted average prescription drug trend of 8.1%, representing a steady decline from 9.3% in the 41st survey and 8.8% from the 42nd survey.  In contrast, the weighted average trend reported by Pharmacy Benefit Managers (PBMs) increased by 1.3% – from 6.2% to 7.5%. As with medical, some respondents cited COVID-19 as influencing their trend projection.

About trend factors
Health insurers use trend factors to calculate premium rates, and large self-funded employers use 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, and changes in the mix of services. Employers could see premium rate increases that differ from the factors summarized in this report, as the final premium rate increase reflects other factors, such as changes in benefit design and recovery of prior period losses.

Survey methodology
Buck’s 43rd National Healthcare Trend Survey is based on responses from close to 100 insurers and/or administrators who provided input on the set of trend factors which they use to project health care costs. Insurers and pharmacy benefit managers administer medical and prescription drug plans covering over 100 million plan participants, according to the study. The survey was conducted between March and May 2022, and the findings analyze the trend factors that health insurers, large self-funded employers, and third-party administrators use to calculate premium rates and project and budget future healthcare costs to employers. Buck’s 43rd National Health Care Trend Survey report is published here.

About Buck
Buck is an integrated HR, pensions, and employee benefits consulting, technology, and administration services firm. Founded more than 100 years ago as an actuarial consultancy, we’ve evolved to serve organizations and trustees across the health, wealth, and career spectrum.

With the ultimate goal of securing the futures of our clients’ employees and members, we develop tech-enabled programs that engage individuals and drive organizational performance. Our award-winning engagement solutions and people-first approach empower the world’s most forward-thinking organizations to protect the physical and financial wellbeing of their employees and members and improve how their people work and live. For more information, visit www.buck.com.

Media contact:
Lumina Communications for Buck
Michael Gallo