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Employer Healthcare Costs Expected to Jump 8.5% in 2012

John Commins, for HealthLeaders Media, May 19, 2011

Several factors will deflate medical costs for health plans and employers in 2012 -- but not necessarily for consumers. These factors are:

  • More cost shifting. Employers are increasingly shifting the burden of rising medical costs to employees through higher cost sharing. High deductible plans were the fastest growing plan designs in 2011, according to PwC's Touchstone survey. Seventeen percent of employers surveyed said high deductible plans were their most common benefit design, up 4 percentage points from 2010. The PwC study also notes that healthcare reform could contribute to cost shifting by further discounting Medicare rates for inpatient care. 
  • Blockbuster brand-name drugs going off patent. In 2012, the cumulative sales of drugs going off patent will be the largest in history, representing approximately $28.1 billion in pharmaceutical sales according to PwC estimates. Increased use of generics will moderate health spending growth.
  • Tiering on out-of-network providers. Employers are increasing deductibles, making it far less attractive for workers to use out-of-network physicians and hospitals. Forty-four percent of employers in 2011 compared to 29% of employers in 2010 said that their out-of-network deductible had crossed the $1,000 threshold. In some markets, payers are becoming more selective about which providers are in the network, choosing to exclude higher-cost and premier hospital systems.

Thompson says the federal health reform law will have minimal effect on the medical cost trend in 2012. Provisions of the Patient Protection and Affordable Care Act that took place prior to 2012 were small changes for which employers already have fully accounted. Medicaid expansions, health insurance exchanges, subsidies to buy private insurance, mandates for employers to offer insurance and mandates for individuals to buy insurance don't take place until 2014 or later.

See Also:
3 in 4 Employers to Increase Health Plan Deductibles or Copays
Milliman: Annual Healthcare Costs Doubled in Under Nine Years
Health insurers making record profits as many postpone care
Medicare Trustees Deliver Grim Outlook  


John Commins is a senior editor with HealthLeaders Media.

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