Large companies have cut their rate of health-care spending growth nearly in half over the last decade by pushing both their employees and health-care providers to be more cost-conscious, according to a new report out Tuesday.
In 2016, employer health costs are expected to rise 6.5 percent—the slowest rate in 10 years, predicted PwC’s Health Research Institute in a forecast of medical-cost trends.
“There are some very interesting things driving that. One is related to the Affordable Care Act: the Cadillac tax plan,” explained Michael Thompson, a PwC principal who specializes in health care and employee benefits.
“The [Cadillac tax, an] excise tax on high-cost plans, has accelerated the pace at which employers have started to implement more cost-sharing—specifically high-deductible plans—with their employees,” he said.
High-deductible plans surge
While the cost-sharing trend began before Obamacare, researchers say more employers are making changes to lower plans’ costs before the so-called Cadillac tax takes affect in three years.
One in four large companies has dropped traditional health plan coverage and now offers only high-deductible plans, according to PwC’s “Behind The Numbers 2016” report. That’s up 40 percent from a year ago, and an increase of 300 percent from 2009.
Read More Inflection point for health-care costs
For workers, the shift has meant a big jump in out-of-pocket costs. Health-plan deductibles for in-network care have gone from an average of $600 in 2009 to $1,200 this year, according to PwC, citing data from Gallup.
Along with benefit changes, employers have added more health-care advisors, support programs and mobile search tools to help workers choose more affordable medical care options.
“It’s certainly putting consumers in the driver’s seat, whether they want to be there or not,” said Thompson.
The report cautioned employers to be careful about shifting too much of the cost burden to workers, because it could backfire. Some employees may avoid getting care for chronic ailments until they’re sick, which could make treating their disease costlier in the long run.
Employers are also pushing health-care providers to reign in their pricing, but PwC said there are two factors that will boost costs in 2016. A new class of cholesterol drugs is expected to be approved later this year. While not these drugs are expected to be as expensive as the recent wave of Hepatitis C drugs, the widely prescribed treatments could drive drug spending higher by $1.5 billion annually starting next year, researchers estimated.
Read More $50B hit to fed budget from 10 drugs
Also, the rising number of security hacks at health-care companies is forcing the industry to spend more on prevention. Eighty-five percent of large health-care organizations surveyed by PwC reported having experienced one or more data breaches in the last year. Nearly two thirds of those surveyed planned to boost security spending in the year ahead, with 63 percent planning to spend more than $1 million.
PwC analysts estimate that prevention will be money well spent. Costs for monitoring, breach detection, and insurance amount to $8 per patient medical record, while the estimated cost of a major breach can top $200 per record between legal expenses, customer restitution and credit monitoring services. But ultimately the increased costs will be passed on to insurers, employers and consumers.