Cost of Healthcare Claims Continue to Rise

Survey: More employers exploring private exchanges and defined contribution strategies

May 2, 2014- SAN FRANCISCO–(BUSINESS WIRE)–As employers try to control rising healthcare premium costs, their employees will continue to pay more for healthcare plans and face higher deductibles and copays, according to a recent survey from Wells Fargo Insurance, part of Wells Fargo & Co (NYSE: WFC). The survey of more than 70 insurance companies nationwide found that overall claim costs will continue to increase in the high single digits next year, a strong indication that employers can expect to pay higher rates.

“Employers are exploring all available options to maintain and improve the health risk of employees, mitigate cost, and maximize their benefit investment,” said Dan Gowen, national practice leader with Wells Fargo Insurance’s Employee Benefits National Practice. “We continue to work with our employee benefits customers to plan, design, and implement programs that best serve their employees and achieve their financial goals.”

Private Exchanges Emerge

The survey also indicated that the top three product innovations in 2014 are accountable care organizations (ACOs), increased wellness programs, and narrow provider network offerings. Forty seven percent of all participants said they will launch their own proprietary exchange by 2015.

“We’re finding that employers are considering private exchanges and defined contribution strategies to manage rising costs,” said Nick Allen, national practice leader for Actuarial Services with Wells Fargo Insurance. “Defined contributions strategies are often just shifting cost to employees, and private exchanges are an option, but may do little to change health care utilization behaviors. Product innovation and consumer engagement remain critical in creating a culture of smarter health care spending.”

The survey, conducted in February and March 2014, also found that dental costs remain lower than medical due to lack of cost shifting from public to private plans and improvements in the dental technology field. Prescription costs are consistent with prior results, but have increased steadily over the last two years. Continued increase in Rx trend is expected due to the higher cost and use of specialty biotech drugs as well as fewer generic drugs coming to market.

In addition to healthcare reform provisions, claims are influenced by price inflation or deflation (changes in unit prices for the same services), increased or decreased use of services, population age, leveraging effect on benefit design, changes in provider treatment patterns, improvements in technology and drug therapies, and cost shifting.

Defined contributions strategies are often just shifting cost to employees, and private exchanges are an option, but may do little to change health care utilization behaviors

Wells Fargo Insurance has conducted this biannual survey since 2008 to measure national healthcare trends. Reflecting claim activity over a six-month period, projected increases in the national average cost of claims include the following:

  • Health maintenance organizations (HMO) – 7.5 percent
  • Point-of-sale (POS) – 7.7 percent
  • Preferred provider organizations (PPO) – 8.3 percent
  • Consumer driver health plans – 8.6 percent
  • Exclusive provider organizations (EPO) – 8.9 percent
  • Indemnity plans – 9.5 percent
  • Prescription plans – 8.6 percent

Wells Fargo’s Employee Benefits National Practice helps customers with financial underwriting and insurance, health and productivity risk management, benefits communication and administration, and compliance with healthcare reform.




About Wells Fargo Insurance

Recently named Best Insurance Broker in the U.S. by Global Finance Magazine1, Wells Fargo Insurance provides solutions for a wide range of customers, including retail consumers, high net worth individuals, small businesses, as well as middle market and large corporate customers. Wells Fargo Insurance writes or places $11 billion of risk premiums annually in property, casualty, benefits, international, personal lines, and life products and also includes the nation’s largest crop insurance provider, Rural Community Insurance Services (RCIS).

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.5 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 locations, 12,500 ATMs, and the internet (, and has offices in 36 countries to support customers who conduct business in the global economy. With more than 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune’s 2013 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially. Wells Fargo perspectives and stories are also available at and at

1 Ranking includes Wells Fargo Insurance Services USA, Inc., Wells Fargo Insurance Services of West Virginia, Inc., Wells Fargo Insurance, Inc., and Rural Community Insurance Company