A 6 Percent Increase in Health Care Premiums Expected for 2017

NEW YORK—Health care benefit cost increases at large U.S. employers are expected to hold steady at 6 percent in 2017. The good news is that health premiums are not growing at a faster rate year after year, as they were a decade ago. The bad news is that the increase in health plan costs still outpaces general inflation in the U.S., which remains below 2 percent, and salary budget increases, which are holding at roughly 3 percent.

The National Business Group on Health (NBGH) released the findings from its Large Employers' 2017 Health Plan Design Survey, which was fielded among NBGH members in May and June of 2016, with responses from 133 large U.S. employers offering coverage to more than 15 million Americans.

According to the survey, the 6 percent increase projected for 2017 is identical to the increase employers would have experienced in each of the past two years had they not made changes to their plan design. However, many employers are working prospectively to hold increases to 5 percent by making some changes to their plans.

Fueling the overall growth in the cost of health benefits is a surge in spending on pharmaceuticals, the newest, high-cost specialty drugs in particular.

Nearly one-third of respondents (31 percent) indicated specialty pharmacy costs was the highest driver of health costs, up from 6 percent in 2014. Overall, respondents cited the following as among their top three cost drivers:

• Specialty pharmacy benefits (80 percent).
• High cost claimants (73 percent).
• Specific high cost diseases and conditions, such as musculoskeletal claims (61 percent).

Two-thirds of employers said that pharmacy management techniques are their most effective tools for controlling rising health care costs. Over half of employers (56 percent) reported that offering high-deductible Consumer-Directed Health Plans (CDHPs) as an option or as their only plan was one of their most effective tactics.

Following is the percentage of respondents who cited the tactic as among their top three ways to control rising health benefit costs:

Prescription drug costs are expected to increase 7.3 percent overall in 2017. But most of this increase is due to specialty drug costs, such as biologics that require special handling. Specialty pharmacy costs are projected to increase 16.8 percent in 2017. To manage all drug costs, employers plan to use a variety of tactics, such as requiring:

• Prior authorization before filling a prescription (95 percent of respondents).
• Quantity limits (91 percent).
• Step therapy, requiring less expensive drugs to be tried first (90 percent).
• Having the member pay the difference between generic and brand prices (62 percent).
• Closed formulary excluding certain brand name drugs (50 percent).
• Integrated medical and pharmacy data for more effective cost management (48 percent).
• Mandatory mail order for maintenance medications (45 percent).
• Four-tier or higher pharmacy plan design (34 percent).
• No co-pay for select generic medications (25 percent).

• More aggressive use of management protocols for specialty medications (74 percent).
• Specialty medications must be obtained through a specialty pharmacy (69 percent).
• Pharmacy plan designed with a specialty tier with greater cost sharing (38 percent).

Employers with a calendar year plan renewal should be engaged with their benefit brokers and consultants to adopt techniques that will provide quality, affordable care for their employees while implementing Health and Wellness Programs that will educate employees and their families on the most effective use of these highly valued benefits.

Hedley Lawson, Contributing Editor
Managing Partner
Aligned Growth Partners, LLC
(707) 217-0979
hlawson@alignedgrowth.com
www.alignedgrowth.com