In its annual report, Behind the Numbers, researchers at PwC estimate an increase of seven percent in healthcare costs to health plans for 2024, which is higher than projections for the previous two years of 2022 (estimated increase of 5.5 percent), and 2023 (an increase of six percent). The report cites inflation, workforce shortage, and rising drug costs as the primary factors driving the expected increase for 2024.
For the report data, PwC researchers surveyed health plans covering 100 million employer-sponsored large and small group members, as well as 10 million Affordable Care Act marketplace members, to identify key inflators and deflators in 2024, as well as trends to watch. After identifying the issues responsible for the expected cost increase, the researchers also noted that “shift in sites of care and biosimilar drugs coming to the market” may help keep costs down.
According to the report, “The higher medical cost trend in 2024 reflects health plans' modeling for inflationary unit cost impacts with their contracted healthcare providers, as well as persistent double-digit pharmacy trends driven by specialty drugs and the increasing use of certain medications used to treat Type 2 Diabetes or weight loss.” However, it also said, “With the increased demand for home-based services and virtual care, the healthcare delivery system has reached a new phase. Plans are factoring in higher utilization of less expensive care settings and virtual care when pricing their 2024 plans and beyond, helping plans offset the trend inflators."
In its focus on trends that could influence future medical costs, the report highlighted six areas that industry professionals should watch closely as costs begin to increase. They include:
· Total cost of care management: This is expected to be deflator on costs as national insurers grow and acquire other plans.
· COVID-19: The effect will likely be neutral as health plans did not report higher utilization of care stemming from suppressed demand during the pandemic.
· Health equity: As health plans continue to focus on health equity, the short- and long-term effect is yet to be seen on plans' cost of care models.
· Behavioral health: Utilization spiked during the pandemic but has since slowed down, with payers not anticipating it as an inflator in the future.
· Price transparency rule: The regulation for health plans is still in its infancy after going into effect July 2022.
Medicaid redetermination: Most plans view this as neutral, with the individual market expected to feel the most impact.