Buck Bond Group

Buck survey shows medical costs for employer-sponsored plans in 2023-2024 have yet to fully adjust for inflation

New York, NY – May 2, 2023 – The impact of inflation is not yet fully reflected in medical trend factors, according to Buck, an integrated HR, pensions, and employee benefits consulting, technology, and administration services firm. The findings were released today in Buck’s 44th National Healthcare Trend Survey, a report that identifies trend factors that are used to project employers’ healthcare costs for 2023-2024.

Buck’s annual survey of nearly 100 health insurers and health plan administrators covering more than 100 million plan participants found that while medical trend factors have yet to fully adjust for recent inflationary increases, they continue to increase at a rate consistent with trends reported in the prior survey, which will likely drive healthcare premiums higher in the coming year.

“While there has been an uptick in the price of gas, food, and other goods and services as a result of inflation, it does not appear to have yet been generally reflected in the medical trend factors used by insurers to set premium rates,” said Harvey Sobel, FSA, a Buck principal and consulting actuary who directed the survey. “As providers renegotiate their fees with insurers, we expect to see higher medical trend factors in the future as medical trends have historically outpaced general inflationary increases.”

According to the survey, factors contributing to the high rates of increase include greater use of diagnostic tests and treatments, Medicare and Medicaid fee limits, higher provider administrative costs due to regulatory scrutiny, industry consolidation, and higher costs associated with advances in medical technology and treatments.

Key findings:

  • Medical trends: Health insurers reported medical trend factors that vary by product, averaging 6.2% to 6.8%. These trends are generally consistent with the trends reported in the prior survey, although there is a wide range of trends reported (e.g., the PPO trend ranges from a low of 0.2% to a high of 11.8%). The trend factor for plans that supplement Medicare (excluding prescription drugs) decreased by 0.5% – from 5.59 to 5.07% – following 7 consecutive increases from 3.0% reported in 2018. Some respondents cited changes in their negotiated provider rates, changes in utilization, and COVID-19 as contributing to changes in their trend factors (for decreases as well as increases).
  • Prescription drugs: Health insurers reported a weighted average prescription drug trend of 9.3% – up from 8.1% from the prior survey. Increases in specialty drug utilization and cost were cited as contributing to the increase. Some respondents cited mandated benefits as an additional factor.
  • Dental: Dental insurers reported weighted average dental trends ranging from 4.1% for DMOs to 5.6% for Scheduled Plans. While these trends are consistent with those reported in the prior survey, several respondents cited negotiated rates with dentists as being the reason for their changing trend (whether up or down). While only 4 insurers provided scheduled trend factors, this is the second survey reporting a weighted average trend in the 5.6-5.7% range, up from trends in the 3% range in prior surveys.

About trend factors
The trend factors collected for this survey (the 44th edition) are being used by insurers to calculate premium and funding rates for health insurance plans effective in 2023- 2024.

Survey methodology
Buck’s National Healthcare Trend Survey analyzes the trend factors used by health insurers and third-party administrators to project employers’ future healthcare costs. Close to 100 insurers and/or administrators responded in December 2022 to our survey request. Participants provided us with a set of the annual trend factors they are currently using to project employers’ healthcare costs for 2023-2024.

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