The Health Plan Cost Trend is expected to reach historic levels in 2027, according to Segal’s latest survey. Segal, a leading benefits and HR consulting firm, released the 2027 Segal Health Plan Cost Trend Survey. The report highlights rising employer-sponsored healthcare expenses.
According to the annual report, costs for the medical plan could go up by 9.9 percent. In fact, it is one of the highest healthcare expense trends in 15 years. Not only that, but the report includes more than 80 percent of the commercially insured and self-insured market. There are several reasons why healthcare costs are going up. They include inflation, use of artificial intelligence, consolidation of the healthcare industry, and problems with surprise billing arbitration.
“We have seen elevated medical trends for several years, but costs now feel like they’re reaching a breaking point,” said Edward Kaplan, National Health Practice Leader and Senior Vice President at Segal. “Employers and Taft-Hartley plans are under intense cost pressures to manage the affordability of wage increases, price inflation and health benefit commitments, forcing more difficult choices for decision-makers.”
Key Factors Driving Rising Healthcare Costs
The cost of prescription drugs continues to be an area of concern. According to the survey, it shows that the trend in pharmacies will increase by 11.5 percent. Moreover, increased demand for GLP-1 anti-obesity drugs will also contribute to increased spending on specialty drugs. The issue of consolidation in the healthcare industry has also impacted the cost aspect.
AI utilization is yet another example of a developing factor. The increase in coding pressure, combined with an absence of progress in patient care, leads to increasing hospital costs. As pointed out by Segal, this constitutes close to 20% of the increase in hospital costs. The No Surprises Act arbitration procedure also influences expenses. The process of Independent Dispute Resolution has generated substantial costs for the system starting from 2022.
“Medical providers prevail 88 percent of the time in No Surprises Act disputes, at costs much higher than standard in-network rates,” said Eileen Flick, Leader of Healthcare Informatics and Senior Vice President at Segal. “These outcomes are fueling unnecessary cost growth across the healthcare system. It’s imperative that plan sponsors have visibility into these outcomes and are armed with the information necessary to better navigate this complex process.”
On the other hand, there have been new methods being introduced by employers in controlling their costs. These methods include network optimization, contracting transparency, and site of care improvement. Data-driven cost controls are being utilized as well. This is why the Health Plan Cost Trend findings of Segal have emphasized the importance of proactive healthcare management.
“There has never been more information available, including transparency, plan and claims data for plan sponsors to leverage,” said Eric Miller, Vice President and Consulting Actuary at Segal. “While the feeling of exasperation is palpable throughout the economy, there is benefit to taking an active role in managing plan costs through strategies that are targeted and data informed.”
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News Source: Businesswire.com
