The description by many health care commentators of high pharmaceutical prices as the most significant driver in insurance premium hikes may be misdirected, according to a report released by Avalere Health on August 2. Avalere’s analysis of proposed rate filings for nine states found that drug costs were responsible for only about 14% of health insurers’ premium justifications for 2017, whereas drugs accounted for approximately 18% of insurance claims in 2015. Normally, insurers’ premium requests track the insurers’ claims experience from prior years.
Accounting for about 30% of 2017 rate increase requests, outpatient spending – not pharmaceutical costs – is anticipated to be the largest driver of premium hikes. The analysis also found that insurers expect professional services to account for about 28% of claims in 2017 and that costs for inpatient care will contribute 15.4% to 2017 premium increases.
While the Avalere analysis emphasizes the decreased percentage of 2017 premium increases attributable to drug costs relative to 2015, Michael Taggart of Milliman, Inc., explained in an August 3 statement to Bloomberg BNA that claim costs for 2015 and 2016 already reflect a significant increase in drug costs. “They’re not going to assume that there’s another year with percentage increases as big,” he noted. “It’s already baked into their starting numbers.”
Though analysts may disagree on the extent to which drug prices are contributing to rising insurance premiums, the Avalere Health analysis makes it clear that no single health industry stakeholder is primarily responsible for increases.