Many forces will push healthcare costs back up

Healthcare cost increases have been historically low in recent years, but the publication State of Reform believes that they will soon return to double-digit rates of growth.

There are five different areas that could push healthcare costs upward, according to Paul Lambert of Forum Solutions LLC and Jonathan Hensley of Capital Benefit Solutions.

Perhaps the most significant is the recent underwriting losses in the insurance sector, along with the narrowing of the risk corridors set by the federal government under the Affordable Care Act and what they say is a significant increase in claims above $100,000 per person.

Another significant trend is the continued rise of pharmaceutical drug costs, along with the coming introduction of PCSK9, a cholesterol-lowering drug that is expected to eventually supplant lower-cost statins. The continued growth of value-based payments and accountable care organizations also put more financial pressure on providers.

Other economic forecasts also foretell bigger increases in spending. A recent study by the Centers for Medicare & Medicaid Services projects a 5.8 percent growth rate in spending between 2014 and 2024. Another study by the Kaiser Family Foundation projects that spending increases will reach 7 percent per year by the end of this decade.

The authors noted that the current bull market has also gotten long in the tooth, and an impending interest rate hike could slow down economic growth, creating more problems.

"Longer term, a recession creates a nightmare scenario for health insurers where healthier, lower risk enrollees forgo health insurance, putting additional pressure on insurers and premiums," Lambert and Hensley wrote.

To learn more:
- read the State of Reform article