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2013 Healthcare Costs Are Expected To Show Signs Of Slowing Growth Rate

In planning for 2013 healthcare benefits and their costs, there is some good news for HR Leaders.

Healthcare spending in the United States is expected to grow at a historically low rate of 7.5 percent next year, according to the annual Behind the Numbers report on medical cost trend, published today by the Health Research Institute (HRI) of PwC US.

The projection continues a pattern of slower medical growth, a reflection of the sluggish economy, increased focus on cost containment by the industry, lower use of services by cost-conscious patients and efforts by employers to hold down expenses.

Medical inflation has been lower than expected for the past three years, and recalibration of previous estimates shows a low range of 7 percent to 7.5 percent from 2010 through 2013. Historically, healthcare spending bounces back up as the economy recovers. But, the HRI report identifies structural changes that may temper that pattern. A fourth year of relatively low growth suggests that the gap between healthcare spending and overall inflation may be narrowing to a more sustainable level.

Medical cost trend helps insurers and large employers set premium rates for the following year. For US employers, the net impact of next year’s increase could be as low as 5.5 percent, after accounting for changes in benefit design by purchasers, HRI estimates.

Employers are focused on two primary strategies to control medical costs in 2013: increasing the employee share of costs and expanding health and wellness programs, according to the PwC 2012 Health and Well-Being Touchstone Survey of 1,400 employers in 34 industries.

The survey also showed that plan design features with the most significant changes in 2012 were a considerable increase in in-network deductibles, emergency room co-payments and prescription drug co-payments. Highlights include:

  • Nearly six in ten employers (57 percent) are considering increasing employee contributions to health plans.
  • Half of employers are considering increasing cost-sharing through plan design, such as higher deductibles. The average emergency room co-pay, for example, is now $125 or more.
  • More than half of employers are considering raising employee prescription drug plan costs.
  • Average enrollment in high deductible plans coupled with a Health Reimbursement Account has increased to 43.2 percent in 2012 from 34.2 percent in 2010.
  • Nearly three quarters of employers (72 percent) offer wellness programs, and half of those say they are considering expanding those programs next year.

Slower growth in healthcare costs could be the new normal, said Michael Thompson, principal, human resource services, PwC. “We’re seeing long-term trends that could keep cost increases in check. As employers shift expenses to their employees, for example, these workers are pursuing lower-cost alternatives. Even as the economy strengthens, changes in behavior by employers and consumers may help limit medical growth.

In Behind the Numbers, HRI explores the leading cross currents likely to shape medical cost trend next year. One of two factors expected to “inflate the trend in 2013 is an uptick in the consumption of healthcare as newly hired workers obtain coverage and patients who postponed elective procedures feel more confident about spending. Medical and technological advances that provide more specialized, sophisticated and expensive treatment also are expected to push up overall healthcare spending.

Four factors HRI expects will deflate the medical cost trend in 2013 are: Market pressure to reduce medical supply and equipment costs; increased popularity of new methods to deliver primary; increased availability of comparative cost information; and accelerated savings from the pharmaceutical patent cliff.

Market forces are driving demands for better outcomes and reasonable costs,said Kelly Barnes, US health industries leader, PwC. The question is: How will the industry respond? We expect to see health organizations create services and partnerships that engage consumers and improve quality. It isn't just dollars spent, but value derived.

Behind the Numbers outlines the actions that employers, insurers, providers and pharmaceutical and life sciences companies are taking now to manage costs as well as strategies for the future. This is the seventh annual Behind the Numbers report published by HRI.

A full copy of Medical Cost Trend: Behind the Numbers 2013 and highlights of the 2012 Health and Well-Being Touchstone Survey are available at and at

About the Research
To estimate medical cost trend, HRI conducts research each year to identify new and relevant factors that accelerate or reduce costs. For the 2013 medical cost trend, HRI relied on multiple sources.including interviews with health plan actuaries, providers, health plans and employers

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