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Society of Actuaries Report Reveals Commercial Health Care Cost and Utilization Trends During ACA Implementation

SCHAUMBURG, Ill., July 17, 2019 – The Society of Actuaries (SOA) analyzed Health Care Cost Institute (HCCI) claims data from 2009 – 2015 to better understand cost and utilization trends in the commercial health insurance market. The analysis includes data from three national payers during the initial years of the Affordable Care Act (ACA) and covers individual, small group, large group and self-insured major medical policies. This research is the latest in a series of SOA analyses of HCCI datasets, and furthers the SOA’s mission of arming actuaries with objective, data-driven research relevant to their field.

The SOA analysis revealed that the companies participating in the data set experienced dramatic changes in both population and plan design in the individual market, coinciding with the launch of the ACA exchanges in 2014. Key findings from the analysis, which are not necessarily representative of experience across the entire individual market, include:

  • Increased utilization in the individual market drove higher “per member per month” costs. Claims costs nearly doubled from 2009 – 2015, with a 38 percent increase in 2014 and nearly 30 percent growth in 2015. The increased utilization came from newly insured individuals who focused on episodic care, as opposed to wellness or chronic condition management.
  • Utilization of inpatient services increased dramatically in 2014 and 2015, while the average cost per inpatient procedure went down.
  • The influx of newly insured individuals entering the market, combined with a new requirement for all plans to cover Essential Health Benefits, led to a surge of pent up demand in the individual market.
  • In 2014, when the ACA went into effect, the per-member-per-month cost of maternity care in the individual market went up by 110 percent. This suggests that many pregnant women lacked coverage prior to the ACA.
  • Individual market membership fell for the age 0 –18 group with the onset of the ACA exchanges and the requirement that dependents be allowed to remain on their parent’s plans until age 26. Meanwhile, the 45 –54 and 55 –64 age groups saw the biggest increases in market share.

Conversely, the large and small group markets were relatively stable during this timeframe. Additional key findings include:

  • The large and small group markets had similar cost and utilization trend patterns, with the cost trend ranging from zero to five percent for the entire period studied. Cost-per-service was the main driver of the trend.
  • The continuation of the “keep what you have” plans at the start of the ACA was among the factors that helped maintain the continuity of observed trends in the small and large group markets by reducing the variation in membership and plan design.
  • The large group market saw increased membership in the 19 – 26 age group, likely attributable to the ACA provision allowing dependents to remain of their parent’s insurance plan.

Finally, in the area of pharmaceutical cost trends, significant increases in the cost of specialty medications appeared to drive overall cost increases, while insurers paid an increasing share of pharmaceutical costs.

  • In the large and small group markets, the overall cost of pharmaceuticals increased by 6 percent to 8 percent in both 2014 and 2015.
  • In the individual market, pharmaceutical costs increased by about 25 percent in both 2014 and 2015.
  • In the large and small group markets, the per-member per-month cost of specialty drugs like Hepatitis C treatments and cancer medications went up 30 percent in 2014 and just more than 20 percent in 2015.
  • The percentage of pharmaceutical costs paid by insurers climbed from 63 percent to 73 percent in 2014. It increased to 80 percent in 2015.

“This analysis provides vital information for actuaries to use as they estimate health insurance rates, set budgets and conduct other financial analyses,” said Dale Hall, Managing Director of Research for the SOA. “HCCI data is a critical national resource without which organizations like SOA will be unable to access robust, objective information about what is driving health care costs. We strongly encourage health insurers and other holders of claims data to partner with HCCI to ensure ongoing availability of this data.”

“This partnership with the Society of Actuaries represents what is best about HCCI and core to our mission to provide relevant information to shed light on what is going on in the American health care system,” said Niall Brennan, President and CEO of HCCI. “The results of this collaboration highlight the importance of HCCI data in assessing the impacts of significant federal health policy.”

The HCCI is a nonprofit and non-partisan organization with a mission of understanding the key drivers of health care costs. Four insurers – Aetna, Humana, Kaiser Permanente and United Healthcare –contribute claims data in support of the HCCI’s mission. HCCI currently holds claims data for around 100 million lives, including 50 million with the commercial market.

To view the full SOA analysis and report, click here.

About the Society of Actuaries
With roots dating back to 1889, the Society of Actuaries (SOA) is the world’s largest actuarial professional organization with more than 30,000 actuaries as members. Through research and education, the SOA's mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal challenges. The SOA's vision is for actuaries to be the leading professionals in the measurement and management of risk. www.SOA.org.