How Much of 2017 Health Insurance Increases Are Due to Prescription Drugs?

Prescription drugs aren’t driving 2017 health insurance increases as much as many believe, according to a report by Avalere Health.

Avalere, which does consulting work for a variety of health-care industries including drug companies, analyzed premium requests for Affordable Care Act health plans in nine states and found that on average drug prices were responsible for about 14 percent of the increases despite the fact that in 2015 drug prices made up 18 percent of claims.

Normally, insurers base future premium requests on past claims, Avalere Senior Vice President Elizabeth Carpenter said. “This shows it’s important to look across services and settings of care when thinking about what is driving premium increases,” she said.

The analysis found that the largest share of premium increase requests is for outpatient spending, which accounted for about 30 percent of expected cost increases in 2017. Premiums usually must be approved by state regulators before taking effect.

Larger premium increases for ACA plans are expected in 2017 than occurred in 2016 or 2015 as insurers try to stem losses. UnitedHealth Group, Humana, Aetna and some Blue Cross Blue Shield plans are retreating from the ACA marketplaces in the face of large losses.

While drug prices may not account for the largest share of the 2017 increases, high costs for new drugs such as Gilead Sciences Inc.’s Harvoni hepatitis C treatment may be baked into premium rates from previous years, said Michael Taggart, an actuarial consultant with Milliman Inc.

Claim costs for 2015 and 2016 “already reflect the increase in drug costs” for insurers, said Taggart. Health insurers are “not going to assume that there’s another year with percentage increases as big,” he said.

Rebutting criticism of the pharmaceutical industry’s high prices, the Pharmaceutical Research and Manufacturers of America went on the counteroffensive Aug. 4, releasing a report that said the growth in spending on other health-care services will be five times total medicine spending growth through the next decade.

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