There’s been a good deal of confusion over health care cost trends for the first half of this year. Initial reports indicated they were up dramatically; more recent intel paints a very different story.
So what’s the deal?
First, let’s not confuse “costs” with “insurance premiums”. Unfortunately, many mass media outlets don’t understand that insurance premiums are not costs…which certainly contributes to the confusion. Overall, premium increases for large employers have been trending generally downward for years, with 2014’s 4.4% rise just a touch over 2013’s record-low 4.1% increase. A big part of that is from increased deductibles and employee cost-sharing; today employees pay over a third of the cost of their insurance, a big change from way back in the day when many employers covered the entire cost (yep, I’m old).
Second, let’s not confuse “price” with “cost”, as this report does.
Recall cost is the price per service times the volume of services – so the price matters, as does the utilization of health care.
Fortunately, some sources – the PWC annual report being one of the better ones, don’t conflate or confuse. Their latest estimate is health care costs will go up 6.5% this year, while premiums will only rise 4.5%.
That makes sense – more coverage means more utilization especially among folks who just got insurance. Early indications are the recently uninsured are less healthy than the general population, a finding that should surprise no one. Many may have long-term but relatively low-severity chronic conditions, while some undoubtedly could not get or afford coverage. These newly-insureds will seek care for their long-term conditions, and that care will be pretty expensive. Think of this as a one-time big bump in cost due to pent-up demand; I would not be surprised to see spikes in cost for surgery, orthopedics, cardiology, pulmonology, rheumatology, and other areas with high chronicity over the next couple of years, followed by a reduced inflation rate.
What does this mean for you?
Don’t get too wrapped up in any forecasts or reports of recent cost trends; wait a year before putting much stock in inflation rates and you’ll find you have a lot less back=tracking to do.