Medical Costs

Entering 2024, growing health care costs are the main worry of employer plan sponsors, according to industry experts. To cope with the problem, those experts add, employers may seek novel benefit designs, while also reaching for tried-and-true cost control methodologies like narrower networks.

Brokerage WTW found in a September survey that 69% of surveyed large employers listed health care costs as a “top health and wellbeing priority” over the next three years, and that health care costs were the most frequently named priority by respondents.

“I think that the emphasis on cost is actually bigger now than it was a few years ago,” says Jeff Levin-Scherz, M.D., population health lead at WTW and an assistant professor at the Harvard School of Public Health.

The Lower Costs, More Transparency Act (H.R. 5378), which the U.S. House of Representatives passed on Dec. 11, contains several provisions that would impact health insurance companies such as the requirement that negotiated rates between payers and providers become public. Meanwhile, U.S. Sen. Mike Braun (R-Ind.) has proposed similar legislation that would amend the Public Health Service Act and provide for more health care price transparency.

Taken together with the implementation two years ago of transparency regulations for hospitals and insurers, the bills indicate “there’s a broad recognition that we’ve already moved forward in starting to make this data public, so let’s just improve that in a way that works,” according to Dania Palanker, assistant research professor at Georgetown University’s Center on Health Insurance Reforms.

While major Medicare Advantage insurers are bracing for potential revenue reductions stemming from upcoming changes to the risk adjustment model, three insurers presenting at their recent investor conferences appeared bullish on the prospect of continued growth in MA, and in particular, the sizable opportunity to serve people who are dually eligible for Medicare and Medicaid. According to a recent analysis from AIS’s Directory of Health Plans, roughly 5.6 million out of an estimated 13 million dual eligibles in the U.S. are enrolled in a Dual Eligible Special Needs Plan (D-SNP).

Although managed Medicaid and the exchanges remain its No. 1 and 2 revenue drivers, Centene Corp.’s MA business — which has a large concentration of D-SNP members — will be an “important growth driver for Centene long term,” CEO Sarah London told investors on Dec. 12.

In the latest version of its annual Unsupported Price Increases (UPI) report, the Institute for Clinical and Economic Review (ICER) found that eight high-expenditure drugs with substantial, unjustified net price increases in 2022 cost insurers and patients nearly $1.3 billion.

“After some reduction in net price increases last year, we're again seeing many increases in net prices for drugs with large budget impacts,” ICER Chief Medical Officer David Rind, M.D., tells AIS Health, a division of MMIT. However, Rind says that recent legislative changes could make a difference in future years.

For years, health plans have turned to the prior authorization (PA) process to help prevent the use of unnecessary medications or medical procedures, improve patient outcomes and reduce costs. But as their use has exploded, physicians have pushed back, calling the restrictions onerous and accusing them of hampering their ability to provide care. Now, following years of complaints about PA, several health plans are cutting back on their use of the tactic, potentially spurring others to do the same.

Payers have used PA for decades to help reduce low-value or unsafe care, in turn protecting patients from ineffective or even harmful care and cutting down on waste and unnecessary costs for patients and plans alike. A Milliman report commissioned by the Blue Cross Blue Shield Association and published March 30, 2023, found that if PA were eliminated in the commercial market, increases in premiums could be between $43 billion and $63 billion annually.

Nearly 4.6 million have enrolled in Affordable Care Act exchange plans for 2024 since open enrollment began on Nov. 1, including 919,900 people who did not have exchange plans this year. The data captures sign-ups through Nov. 18 for people in the 32 states that use HealthCare.gov for enrollment and through Nov. 11 for people in the 17 states and Washington, D.C., that have state-based marketplaces. CMS Administrator Chiquita Brooks-LaSure said in a press release that “we have seen an increase in plan selections and a significant increase in the number of new enrollees year over year.” The open enrollment period runs through Jan. 15, 2024, for states using the HealthCare.gov website, while deadlines for state-based marketplaces vary.

The Biden administration on Nov. 16 released reports outlining steps it is taking to address social determinants of health and emphasizing the need to improve individuals’ social circumstances. The documents include the U.S. Playbook to Address Social Determinants of Health, the Call to Action to Address Health-Related Social Needs and a Medicaid and CHIP Health-Related Social Needs Framework. HHS Secretary Xavier Becerra said in a press release that “it is clear that the health of our people does not exist in a vacuum, but it is affected by our access to stable housing, healthy food and clean air to breathe.”

Three quarters into 2023, Moody’s Investors Service says the predictions it made at the start of the year for the health insurance sector — namely, earnings growth in the mid-to-high single digits — have largely proven accurate. However, while financial results were consistent with the credit rating firm’s expectations, analysts said in a new report that the reasons for those results were not exactly what they predicted.

“Our outlook was premised on reduced membership as a result of Medicaid redeterminations and the impact of a possible recession on commercial membership,” the analysts wrote in a report released on Nov. 20. “However, with no recession this year, commercial membership has been better than expected, but its growth has been offset by higher-than-expected MA [Medicare Advantage] utilization.” Additionally, “although Medicaid redeterminations are underway, their impact so far has been relatively small.”

A new report from the Employee Benefit Research Institute (EBRI) confirms that primary care for commercially insured patients is in the midst of a significant transformation. In a study of claims data from 2013 to 2021, EBRI found that fewer patients have a primary care practitioner (PCP), more non-physician practitioners deliver primary care than ever, and sites of care are changing. And the author of the report says he believes the COVID-19 pandemic accelerated the shift.

EBRI’s findings are a mixed bag for payers. On the one hand, the report confirms that the size of the workforce able to deliver primary care is likely growing, and more patients may have better access to a variety of primary care options: 95-97% of all primary care visits were in an office setting prior to 2020, but that share declined to 86% in 2020. Seven to eight percent of primary care visits went to telemedicine that year and 3-4% went to urgent care clinics. However, the report also found that primary care costs have not gone down despite broader access.

Across the U.S. in 2022, 24.5% of health care payments involved two-sided financial risk reimbursement arrangements, according to an analysis published on Oct. 30 from the Health Care Payment Learning & Action Network (HCPLAN). That is up from 19.6% in 2021 and 17.9% in 2020.

While the upward trend is encouraging for those interested in shifting away from a fee-for-service model, health policy experts tell AIS Health, a division of MMIT, that more needs to be done to encourage providers to embrace value-based care. They add that adoption varies based on the payer, with Medicare leading the way and private commercial plans lagging.

Zepbound (tirzepatide), Eli Lilly and Co.’s latest glucagon-like peptide 1 (GLP-1) agonist product and Lilly's first entrant in that category to be marketed only as a weight loss drug, garnered FDA approval on Nov. 8. The approval intensified already fierce public interest in using GLP-1s for weight loss — which could be bad news for payers, especially commercial plan sponsors, who were already concerned before Zepbound’s approval that the high cost and broad appeal of the drugs will cause premiums to spike.

A recent WTW survey found that 38% of employer-backed health plans cover weight loss drugs, while 22% are considering adding coverage. Mercer found that 42% of large employers cover GLP-1 drugs for weight loss. Brokers and employer plan sponsor trade groups have identified burgeoning GLP-1 utilization as a possible reason for future premium hikes.