Segal Consulting has released the results of a survey of health insurance companies. Conductedlast year, the survey was designed to gauge insurers' expectationsfor health plan costs in 2014. It found that they're anticipating areduction in the rate of increase for costs across all types ofmedical insurance plans.

The survey report provides a series of trend projections, whichit derived by proportionally blending medical trends andprescription drug trends. (See Figure 1, below.) For healthmaintenance organizations (HMOs), non-Rx costs are expected toincrease by 7.2 percent in 2014, vs. 8.2 percent in 2013.Fee-for-service (FFS)/indemnity plans are expected to increasemore, but still less than last year: 10.4 percent without Rx, vs.10.8 percent in 2013.

Price inflation in hospital services and brand-name medicationsare two of the major drivers of the rising health plan costs,although increases in both areas are expected to be lower than lastyear. Survey respondents expect prescription drug prices to rise by6.8 percent this year, vs. 8.4 percent in 2013, and expect hospitalprices to rise by 6.3 percent, vs. 6.4 percent last year. Pricesfor physician services are expected to grow by only 3.7 percentthis year, vs. 3.9 percent last year. Survey respondents don'texpect large changes in utilization rates in any category ofmedical service.

Segal cites several drivers of these various cost trends. Manyof today's plans include higher out-of-pocket costs forparticipants. Provider reimbursement arrangements are starting toshift away from the fee-for-service model toward approaches thatreward service providers for efficiency. The Hospital ReadmissionsReduction Program is helping reduce overall hospital spending. Andhealth insurers are increasing the transparency of plan costs.

Nevertheless, the report adds: “While this decline in the trendrate is positive news, it is important to note that medical healthplan cost trends still outpace the consumer price index for allurban consumers (CPI-U) by a margin of at least three-to-one, whichcontinues to serve as a drag on real wage growth.”