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Employer and Health Plan Costs Slow as Consumer Costs Spike


By Tom Halvorson/Monday, January 26, 2015

In a recent New York Times article, Health-Cost Slowdown Isn’t Just About the Economy, the economist author surmised that health care spending is independent of economic trends. This notion is in contrast to government analysts, who have theorized that the recent decrease in spending is caused by Americans skimping on healthcare during tough economic times. The author argues that history shows us that long-term usage trends are not directly correlated with economic health (or lack there-of), and that consumers will need to find ways to access services without greatly increasing their out-of-pocket costs.

Findings from the recent Truven Health AnalyticsTM U.S. Benchmarks and Trends reports for employers and health plans align with the author’s thoughts, suggesting that there are many other factors contributing to the low healthcare trends beyond a slowed economy. The healthcare landscape in the United States is experiencing shifting sands caused by the Affordable Care Act and an increased shift to consumerism through consumer-directed health plans, transparency, and reference-based pricing. While a dampened economy can certainly compound these issues, the gross domestic product is not the driving force behind decreased trend.

As I discussed in a previous blog, nearly one-fifth of all active employee benefit plans are expected to exceed the thresholds for the so-called “Cadillac” excise tax by 2020. Some industries are expected to have even more exposure on the current course; our analysts project that 25 percent of active public employer and 33 percent of active health system employer plans will incur the Cadillac tax in 2018. Employers, looking to mitigate this expense, will likely pass some of it on to employees. This may, in turn, exert some downward pressure on utilization as deductibles, copays, and coinsurance increase. Ultimately, our analysts found that consumer out-of-pocket costs are expected to rise 12 percent annually in the next two years. Though spending for both employers and health plans has recently risen, the increases were more modest -- 3.4 percent last year.

Finally, plan sponsors are looking to achieve savings by empowering consumers to make informed purchasing decisions. Information is more readily available today that at any point in the past, and there continue to be innovative solutions to serve up that information to individuals. Better informed and engaged consumers will shop for more cost-effective alternatives, thus shielding themselves from projected out-of-pocket increases. Payers can facilitate this empowerment by providing personalized enrollment and cost transparency tools to their employers and members. Tools like the Truven Health Treatment Cost Calculator will engage consumers in the decision making process and lead to lower overall unit pricing. 

Tom Halvorson
Director, Analytics & Consulting


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