Employer health care costs are set to rise 6 percent next year, consistent with the trend over the last five years, according to new projection from PwC’s Health Research Institute. But while cost increases have plateaued at a level well below the rates seen a decade ago, they still outpace overall inflation — and PwC warns that the trend remains unsustainable.
“While the predictability is a welcome change from the wild swings and peak double-digit trends in the 2000s, steady as she goes is not good enough,” the report says. “Medical costs continue to grow, yet the workforce’s health and performance aren’t improving.”
To further reduce the growth of medical costs, PwC’s researchers say, employers and health plans will likely have to look beyond reducing utilization or shifting costs to employees and try to tackle high prices. “Efforts by employers to cut utilization have mostly run their course,” they write. “Employers and consumers are plagued by high prices that continue to grow because of new, expensive medical services and drugs, and other factors, such as consolidation.”
PwC also found that employers are rethinking their health plans for next year in hopes of insulating workers from rising costs. "When we asked 'what are you doing in terms of strategy'… last year, a lot of them were going to go full replacement, high-deductible plan. This year they really backed off" plans like that, PwC’s Barbara Gniewek told CNBC. That’s likely the result of a tight job market, she said. Employers have taken to offering plans with smaller provider networks or to contracting directly with health care providers. More employers are also offering advocacy services to help workers in high-deductible plans navigate the system.
In the long run, health care has been claiming an increasingly large share of both employee compensation and gross domestic product. National spending on health is expected to grow from less than 6 percent of GDP in the 1960s to nearly 18 percent by 2020. And while health spending accounted for roughly 6 percent of employee compensation in 1988, that figure is expected to rise to more than 12 percent in 2018.