Aon and SFHSS actuaries warn of higher 2024 health-cost trends; board urged to weigh plan design choices
May 11, 2023 | San Francisco City, San Francisco County, California
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Aon actuary Mike Clark and SFHSS Chief Financial Officer Iftikhar Hussain gave the board an actuarial briefing on cost drivers expected to influence plan renewals for plan year 2024.
They identified four primary drivers: rising healthcare wages and supply costs that increase provider pricing in negotiations; continuing mental-health and substance-use service utilization; higher prevalence of chronic and complex conditions (exacerbated in part by COVID'related morbidity); and pharmaceutical trends, including expensive new therapies and slow biosimilar uptake. Clark and Hussain said these forces combine with changes in how CMS calculates Medicare Advantage revenues (ICD-10 diagnostic capture changes) to create uncertainty and upward pressure on premiums.
Takeaway for the board: Aon flagged roughly a 7% typical national trend into 2024 but cautioned that plan-specific renewals could be materially higher. Commissioners asked what leverage the board has; actuaries recommended pressing plans on value-based contracting, alternative payment models, utilization-management strategies and targeted plan-design changes to reduce avoidable utilization and pharmaceutical spend.
Next steps: Staff and actuaries will present plan-specific renewal recommendations at the May 25 special meeting and discuss Medicare Advantage rate methodology impacts on June 8. Commissioners were reminded timing is constrained by the need to deliver materials to the Board of Supervisors before the August recess.
They identified four primary drivers: rising healthcare wages and supply costs that increase provider pricing in negotiations; continuing mental-health and substance-use service utilization; higher prevalence of chronic and complex conditions (exacerbated in part by COVID'related morbidity); and pharmaceutical trends, including expensive new therapies and slow biosimilar uptake. Clark and Hussain said these forces combine with changes in how CMS calculates Medicare Advantage revenues (ICD-10 diagnostic capture changes) to create uncertainty and upward pressure on premiums.
Takeaway for the board: Aon flagged roughly a 7% typical national trend into 2024 but cautioned that plan-specific renewals could be materially higher. Commissioners asked what leverage the board has; actuaries recommended pressing plans on value-based contracting, alternative payment models, utilization-management strategies and targeted plan-design changes to reduce avoidable utilization and pharmaceutical spend.
Next steps: Staff and actuaries will present plan-specific renewal recommendations at the May 25 special meeting and discuss Medicare Advantage rate methodology impacts on June 8. Commissioners were reminded timing is constrained by the need to deliver materials to the Board of Supervisors before the August recess.
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