Health reform law expected to have minimal effect on medical cost trend in 2012

According to PricewaterhouseCoopers, the 2010 Affordable Care Act will have only a minimal effect on medical cost trends in 2012.  U.S. employers can expect to see healthcare costs rise by 8.5 percent in 2012, compared with an increase of 8 percent in 2011, according to the annual Behind the Numbers report on medical cost trends, published by PwC’s Health Research Institute.  However, mitigating changes in health benefit plan designs, including increased cost-sharing with employees, could keep employers’ costs increases to an average of 7 percent next year, PwC suggests.

Provisions of the federal health reform law that took place prior to 2012 included small changes for which employers already have fully accounted, PwC suggests. The Medicaid expansions, health insurance exchanges, subsidies to buy private insurance, mandates for employers to offer insurance and mandates for individuals to buy insurance take place in 2014 or later, although PwC notes that health reform could contribute to more cost shifting by further discounting Medicare rates for inpatient care.   

“Healthcare organizations are in state of flux over pending health reform provisions, an uncertain economic outlook and financial pressures, and the way they react will have significant implications for their own long-term health in this rapidly changing market,” said Michael Galper, U.S. healthcare payer leader, PwC.  “Health reform is pressuring employers, providers, insurers and pharmaceutical manufacturers to be more cost-conscious and accountable for costs, quality and performance, and they will need to work together to provide better, coordinated care, greater transparency in pricing and more patient-friendly practices.”

As part of the 2011 Touchstone Health and Well-being Employer Survey, PwC asked employers about changes they are making in their benefit plans, particularly in light of health reform. The survey found:  

• Eighty-four percent of employers said they are likely to make changes in plan design to offset anticipated costs associated with the health reform law;
• Eighty-six percent of employers said they are likely to re-evaluate their overall benefits strategy;
• One-half (50 percent) of employers are considering significantly changing or eliminating company subsidies for dependent medical coverage; and
• Eighty-nine percent of employers will likely increase their health and wellness efforts.

“Employers continue to be concerned about the sustainability of healthcare cost increases especially in the long-term, and they are reacting by making changes now,” said Michael Thompson, principal, human resource services, PwC.  “Healthcare in the future will be very different than we know it today, and uncertainty about these changes complicates healthcare benefits strategies.  However, the most proactive employers are planning for potential future scenarios and making incremental changes now toward a longer-term view of transformational change in the way healthcare is delivered and paid for and a more collaborative and integrated model aligned around health and wellness.”

For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, just click here.