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CCH® HR MANAGEMENT - 06/19/09

Health care cost increases to continue at double digit rates, according to survey

Costs for the most popular types of health care coverage are projected to increase at double-digit rates through the remainder of 2009 and into 2010, according to a recent national survey of insurers and administrators conducted by Buck Consultants, an ACS company.

"Although our survey reveals a slight decrease in cost trends since our prior study, there are signs that we're going into another cycle of high trends," said Harvey Sobel, FSA, a Buck principal and consulting actuary who directed the survey. "Health insurers may increase costs in light of the continuing economic downturn and legislation such as mental health parity and the recent expansion of COBRA. They may also attempt to increase their prices prior to the implementation of national health care reform, including a new 'public insurance option'."

For its 20th National Health Care Trend Survey, Buck Consultants analyzed responses from more than 100 health insurers, HMOs and third-party administrators. Buck measured the projected average annual increase in employer-provided health care benefit costs. Insurers providing medical trends for the survey cover a total of approximately 95 million people. Costs for the most popular plans continue to increase by more than 10 percent, and are slightly lower than the trends reported in Buck's previous survey, released in September 2008.

Health insurers reported an average prescription drug trend of 10.8 percent, down 0.6 percent from the 11.4 percent reported in the prior survey. This is three percentage points higher than the 7.8 percent reported by pharmacy benefit managers (who generally do not take any underwriting risk).

For plans that supplement Medicare, health insurers reported a projected increase of 7.4 percent excluding prescription drug coverage. This lower trend reflects the impact of federal controls on Medicare fees and the lower increases expected in Medicare deductibles and copays.

The survey also reported trend factors for dental and vision plans. Health insurers use trend factors to calculate premium rates, and large self-funded employers use these trend factors to budget their future health care costs. In general, trend factors provide for price increases that may result from such variables as inflation, utilization of services, technology, changes in the mix of services, and mandated benefits.

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