Benefits May 30, 2003

Aon: Health Care Rate Trends Still In Double-Digits

May 30, 2003 (PLANSPONSOR.com) - The increasing negotiating power of health care providers, escalating demands for services and the lessening of tight managed care controls continue to contribute to double-digit health care cost increases.
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Largest among the forecast health care trend rate increases – the predicted increase in claims costs – between April and September of 2003 are Indemnity plans with prescription coverage at 17.2%. This is followed by prescription included HMOs (16.4%), POS (16.1%) and PPO (15.7%), according to Aon Consulting’s Spring 2003 Health Care Trend Survey.

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Likewise, health care trend rates are predicted to see similar increases in nonprescription coverage plans, with Indemnity plans again leading the way (16.4%). This is followed by:

  • HMO (14.7%)
  • POS (14.5%)
  • PPO (16.4%)

Despite Indemnity plans continuing to lead in projected increases, the gap between these plans and managed care plans is closing. Among the managed care options, the increase in HMO and POS trend rates are up about one percentage point from fall’s study. However, with the boost HMO/POS trend rates are now higher than PPO trend rates.

Pharmacy, dental and vision trend rates, however, continue to remain relatively stable. Predictions for the largest increase continues to be pharmacy plans (17.7%), followed by indemnity and PPO dental plans (7.6%), DHMO (4.8%) and vision (3.8%).

Trend Components

The trend rates composed and analyzed by Aon include the following components:

  • Price Inflation – the average increase in the cost of goods and services of health care providers for medical, prescription drug, dental and vision services.
  • Deductible Leveraging – the cost added to a health plan due to the subtraction of an unchanging deductible from a trended claim amount.
  • Utilization – the increase in the number of medical procedures performed in response to an aging population and new medical techniques.
  • Technological Advances – the change in cost due to new procedures replacing old procedures.
  • Cost Shifting – an individual provider’s shifting of costs from fixed or discount payers to reasonable and customary payers such as insurance companies or self-funded employers.

A copy of the Aon study can be found at http://www.aon.com/about/publications/issues/2003_health_care_survey.jsp .

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