Avalere Health Projects Outpatient Spending Biggest Driver of 2017 Premium Increases

At 27.4%, outpatient spending far exceeded the 17.7% that health plans spent on drugs in 2015. This, according to Avalere Health, means outpatient service charges will cause a 29.9% spike in healthcare premiums in 2017, much higher than the 14.3% projected for medications.

The company’s projections for 2017 are similar to their findings for 2016—Avalere found that outpatient spending accounted for 28.9% of premium increases, the highest across 6 categories:

• Inpatient hospital services
• Outpatient hospital services
• Professional costs
• Prescrption drug spending
• Capitation costs
• Other medical costs

Interestingly, the analysis found that the costs for inpatient care and would contribute only 15.4% of premium increases in 2017, despite nearly 20% spent on inpatient care in 2015. This contradicts the 2016 estimates, where 21.7% spending in 2014 claims were estimated to result in a 24.5% increase in 2016 premiums.

For the current analysis, Avalere used 2015 claims data from 9 states that would influence the individual and small group market in 2017: Connecticut, Maryland, Maine, Ohio, Oregon, Rhode Island, Virginia, Vermont, and Washington. Grandfathered plans and short-term products were excluded from the analysis. The categories remained the same as for the previous year, and the issuer’s 2017 Universal Rate and Review Templates, which contains issuers’ historical and expected member utilization, was used. “Other costs,” included non-capitated primary care, specialist, therapy, the professional component of laboratory and radiology, and other professional services, other than hospital based professionals whose payments are included in facility fees.

Once the proportion of proposed premium increases in 2017 were estimated for each category, they were compared with the actual spending reported for the same market in 2015. A caveat was that Avalere did not weight the analysis by health plan enrollment and all 9 states were weighted equally. However, the influence of drug spend on premium increases varied across the states: it was higher in 5 of the 9 states examined.

Caroline Pearson, senior vice president at Avalere, said, “Preliminary data indicate that drugs are not likely to have a disproportionate impact on premiums in 2017. Instead, outpatient spending continues to drive premium increases.”