Committees Active on This Topic

Additional Resources

Rising Health Care Costs: Drivers, Challenges and Solutions
December 2018, CIPR Study

A Brief Exploration of Rising Health Care Costs
August 2018, CIPR Newsletter

Drivers of 2019 Health Insurance Premium Changes Issue Brief
June 2018, Academy of Actuaries (AAA)

Important Issues for Consumers, Insurers and Insurance Regulators
March 2018, CIPR Newsletter

Cost Drivers in Healthcare
March 2017, Alliance for Health Reform

Healthcare Cost Drivers White Paper
June 2015, National Association of Health Underwriters


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Brian Webb
Health Policy Team Manager

NAIC Center for Insurance Policy and Research (CIPR)

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Health Care Cost Drivers

Last Updated 1/16/2019

Issue: The U.S. has the most expensive health care system in the world, with expenditures growing at a faster rate than the economy and well above the rate of inflation. Aggregate national health care spending today constitutes about 18% of the country's gross domestic product (GDP) and is projected to reach around 20% of the GDP or $5.7 trillion by 2026. These costs are clearly unsustainable for us as a nation.

Consumers are faced with increasing costs for most health care services and prescription drugs. At the same time, the average use of the same services has stayed the same or declined. Most concerning is the fact that the rise in prices and overall spending is not always proportionate to better quality of services and improved outcomes. It is important to clarify the main factors driving rising health care costs and how health care is delivered and paid for in rethinking health care for all Americans.

Many misperceive the solution lies in "fixing" health insurance. However, while entities that cover healthcare costs can play an important role in containing some costs, for the most part the insurance mechanism simply passes along the underlying healthcare costs. It is in these underlying systemic costs where the real, long-term solutions lie. This includes rethinking the way health care is paid and delivered. The goal is to contain health care costs while improving health care access and outcomes.

Status: The NAIC Health Insurance and Managed Care (B) Committee and the NAIC Center for Insurance Policy and Research (CIPR) have been tasked to investigate health care cost drivers and report findings and recommendations. The CIPR study titled Rising Health Care Costs: Drivers, Challenges and Solutions brings together thought leaders, researchers and practitioners in the health care field to author a series of papers. These papers examine the principal health care cost drivers in detail and analyze their implications for consumers, insurers and providers. The papers will also discuss the impact of nutrition on health care costs, the rising pharmaceutical prices, the issue of wasteful spending, the growing acceptance of value-based reimbursement and the role of data analytics in the health care system among other issues.

In December 2018, the CIRP released the executive summary of the study, authored by Julie Mix McPeak, NAIC President and Tennessee insurance Commissioner. Along with the executive summary the first paper titled Food is Medicine: Why Healthier Eating Should Be a Priority for Health Care Providers, Insurers and Government was also released.

The NAIC hosted two major events on health care cost drivers in 2018 – an Insurance Summit keynote conversation featuring Commissioner McPeak and a CIPR event during the NAIC’s 2018 Fall National Meeting, which Commissioner McPeak hosted and moderated.