Understanding Trends

Trend is a forecast of per capita claim cost increases that take into account various factors, including price inflation, utilization, government-mandated benefits, and new treatments, therapies and technology. Trend is the estimated increase in future healthcare costs.

Although there may be a high correlation between a trend and the actual cost increase assessed at renewal, trend and the net annual change in plan costs are not necessarily the same.

• Renewals close the gap between health care fees and actual plan costs
• A customer can experience a 5% trend and could receive a 10% renewal because health care fees may account for prospective costs that will be incurred in the future (small group claim experience is not credible and has a higher degree of volatility)
• Renewals will vary nationally based on regional pricing variations, state required plan design changes and changes in insurance carrier rates

Other factors that impact renewals include, but are not limited to:

• High-cost claims
• High ER usage over other more cost-efficient care when applicable
• Rx specialty drug utilization
• Obtaining services in-network vs. out-of-network

Price Inflation Impacts*

Price inflation could be impacted by:

• COVID-19: Drivers are related to the number of 2021 services that were deferred, potential surges in future COVID-19 cases, costs associated with other chronic conditions and the use of COVID-19 tests, treatments and vaccines.
• Hospital cost trend: the prices of goods and services are a more significant factor than higher utilization of services in hospital trend increases.
• Physician Services: Pent-up demand as a result of COVID-19 may create higher demand for physician services that cannot be solved solely via telemedicine.
• Specialty Rx: Projected trend for specialty drugs will increase by 13.4%, higher than 2021 projections of 11.5%.
• Outpatient Rx: projected trend is expected (specialty and non-specialty drugs) to increase from 7.3% to 8.4% with the leading driver of Rx trend being price inflation.

2022 General Health Care Trend Inflators*

Inflator: Convenience has a cost

Increases in the availability of health care, such as retail clinics and urgent care centers, has led to higher outpatient utilization. Even if higher use of these alternative sites reduces costs per visit, the savings may result in more of visits. Telemedicine has demonstrated that it can be a lower-cost option for non-emergent visits.

Inflator: Increased access for behavioral health & substance abuse

Behavioral health and substance abuse were once on the back burner of health treatments, but now a regulatory push and mainstream recognition of these issues will likely cause these issues to be a crucial part of an employer's health benefits. Also, COVID-19 and forced isolation could drive higher need and utilization of behavioral health services.

Inflator: Hospital and provider network consolidations

Throughout the United States, health care systems continue to consolidate under larger brands, which has influenced network negotiated reimbursement rates paid to providers. Reimbursement rates are projected to be higher for hospital networks than for physicians.

Inflator: Specialty drugs

Specialty drug costs are still trending in the double digits. Specialty Rx utilization has increased by approximately 2.2% over the last year. Additionally, specialty Rx accounts for 40% of new drugs being launched that include new drugs to treat cancer and orphan diseases and conditions

2022 General Health Care Trend Deflators*

Deflator: Lower Cost Service Delivery Settings (Telehealth and Urgent Care)

Some employers are encouraging employees to consider lower cost care options like telemedicine and urgent care facilities. Expect to see more free-standing facilities and in-home benefits like telemedicine. Simultaneously, providers are taking steps to move people away from hospitals and other high-cost settings.

Deflator: Care advocacy

Some employers are offering employees new services that engage and guide consumers to better quality and lower-cost care. TriNet added HealthAdvocate in 2021.

Deflator: Mail order and home delivery of Rx

There are cost savings when mail order programs are used to fill scripts vs. using retail pharmacies. COVID-19 saw a modest increase in mail order and home delivery services, but even this modest increase resulted in realized plan cost savings.

Deflator: Biosimilar Medications

Biologics make up a good portion of specialty drugs. A biosimilar is a biologic drug that is similar to another biologic medication. After many years of research and development, several biosimilar products are expected to launch in 2023.

**This trend deflator is being followed closely for future cost reductions.

Companies can help bend their cost trends by educating worksite employees on:

• Using telemedicine for non-emergent care
• May include medical, behavioral health and dermatology (varies by carrier)
• Using Rx mail order vs. retail where applicable
• Using healthcare transparency tools for procedures
• Setting matters and can have a material impact on cost drivers
• Adhering to medications and other prescribed treatments
• Acute condition flareups that may occur due to failure to take medications timely and properly increases avoidable costs. The top three conditions that have these flareups are*:
• Asthma
• Diabetes
• Coronary Artery Disease

• Getting annual Wellness visits and preventive screenings.
• Early diagnosis can reduce future costs or prevent catastrophic costs.
• Getting prenatal care: consistent monitoring during pregnancy can potentially reduce maternity costs. Most carriers have specific prenatal programs.

*2022 Segal Health Plan Trend Survey