With the season for negotiating annual contracts with health insurers and providers nearly at hand, U.S. companies are forecasting an average 7.7% rise in their healthcare costs for 2027 before making any changes to plan design.
In the annual “Pulse of the Purchaser” survey by the National Alliance of Healthcare Purchaser Coalitions, executives for a third of the 408 participating companies pegged next year’s cost increase at 9% or more.
As usual, fully insured employers are in the worst position looking forward. Almost half of them (45%) said they expect cost hikes of at least 9%, compared with 37% of self-insured employers who expected the same. The best outlook, by a wide margin, was for those with a mixed funding approach, only 23% of which foresaw an increase that large.
The largest contributor to estimated healthcare spending is hospital/facility costs, accounting for more than 30% of the total. Next were prescription drug costs (21%) and professional fees (19%).
Almost all (93%) of those polled agreed higher costs will result in further cost shifting, and 40% strongly agreed. And most (83%) agreed that health cost increases force trade-offs with wage increases.
A major theme of the alliance’s survey report was the cost advantage for companies with complete access to their medical claims data. Such access enables a wide range of hospital purchasing and high-cost claims strategies.
For example, 70% of employers with full claims data access have enhanced screening or early detection programs, compared to 58% of the others. The report details similar gaps for 25 additional cost-containing strategies.
While it may seem counterintuitive that even fully insured employers do not always have complete access to claims data, it’s a product of assorted complicating factors.
Such factors include confidentiality clauses in contracts between health plan sponsors and health insurers or third-party administrators. Insurers frequently argue that negotiated rates with providers are proprietary trade secrets.
Also functioning to thwart full data access include: privacy safeguards under the Health Insurance Portability and Accountability Act, commonly referred to as HIPAA; a lack of standardized claims data formats; the specialized data architecture and analytics capacity needed to process massive raw datasets that many companies don’t possess; and obscure healthcare pricing norms that benefit insurance carriers and TPAs.
“Employers are increasingly frustrated that they are expected to pay the bill but often lack the information, leverage or contractual rights to influence outcomes,” said Shawn Gremminger, CEO of the National Alliance of Healthcare Purchaser Coalitions.
That dissatisfaction, Gremminger added, is driving stronger support for Pharmacy Benefits Manager reform, hospital pricing transparency, hospital rate regulation and closer oversight of healthcare markets. “No single strategy will solve system-side dysfunction, but thoughtful action, supported by transparency and accountability expectations, can make a difference,” he said.
