High Deductibles, Narrow Networks Will Help Hold Down Medical Cost Trend in 2016

Although the introduction of new specialty drugs and increased investments into personal health data security, moderating forces will keep healthcare spending growth in check in 2016, according to a report from PwC’s Health Research Institute (HRI).

The annual Medical Cost Trend: Behind the Numbers report projects medical inflation will be 6.5% in 2016, slightly lower than the 6.8% projected for 2015. This continued slowdown in healthcare spending growth represents a 10-year trend of slowing employer medical cost-trend growth, according to PwC. However, it is still notable that medical inflation continues to outpace general economic inflation.

In 2016, there are 3 key factors expected to reduce medical spending growth: the Affordable Care Act’s “Cadillac tax”; greater adoption of virtual care technology; and new health advisers steering consumers to more efficient healthcare.

Furthermore, after taking into account likely changes in benefit design, such as narrow networks and higher deductibles and co-pays, the net growth rate should drop to 4.5% in 2015.

“While the health industry has improved in efficiency over the past decade, the slowing employer medical cost growth is due to the increased role of savvy health consumers facing higher cost-sharing responsibilities and more complex decisions,” Kelly Barnes, PwC’s US health industries leader, said in a statement.

However, high cost-sharing can also be a barrier to care. A PwC HRI consumer survey found that due to cost shifting, in the last 12 months 28% of consumers skipped seeing a doctor and 24% skipped prescription medicine or too less than prescribed.

High-deductible plans have continued to grow in popularity with 31% of employers offering them, up from 26% last year. However, employers are also offering more health plans with 4.1 options today compared with 2.9 options on average last year.

“The New Health Economy is reshaping the landscape for the employer-based health insurance plans that continue to cover most Americans,” Michael Thompson, principal of PwC’s human resource services practice, said. “One result is that consumers have more plan choices than ever before. But at the same time, the pressure on employers to control their health budgets means that employees are having to pick up more of their healthcare tab than ever before.”