Aon Forecasts 2004 Health Care Increase Of At Least 16%

By

Employers can expect cost increases of 16% or more for health care next year, according to the latest forecast from Aon Consulting, a unit of Aon Corporation, Chicago.

One surprising finding of the survey is that rate increases among different types of plans are narrowing.

Aon Consultings Spring 2003 Health Care Trend Survey forecasts rate increases for plans with pharmacy benefits of 16.4% for health maintenance organizations, 16.1% for point-of-service plans, 15.7% for paid provider organization plans and 17.2% for indemnity plans.

The figures are based on data from actuaries at more than 20 leading medical, dental, pharmacy and vision insurers, Aon says.

The increases were higher than those the actuaries predicted in 2002 for this year for HMOs and POS plans, which were both forecast at 15.1%.

Next years increases for both PPOs and indemnity plans would actually be down slightly from this years forecasted rise of 15.8% for PPOs and 18.1% for indemnity plans.

For group policies without prescription plans, the forecast rate increases for 2004 are 14.7% for HMOs, up from 14% the year before; 14.5% for POS plans, up from 13.9%; 14.4% for PPOs, down from 14.6%; and 16.4% for indemnity plans, down from 17.2%.

Actual rate increases for 2003 are close to those predicted by carriers actuaries, says Bill Sharon, senior vice president of Aon Consultings health and welfare practice.

However, few employers actually pay the rates predicted in the forecast because they make adjustments, such as changing carriers or raising employees deductibles and copayments, Sharon notes.

“The forecasted figures apply if you dont do anything to cut costs,” he says. “But most employers actually do something. So actual increases may be 2% to 4% less than the forecast.”

Next years predicted increases would be about eight times the annual general inflation rate of 2.1%, as recently reported by the Bureau of Labor Statistics in Washington, Sharon points out.

A notable aspect of Aons most recent surveys is that health plan rates for different types of plans are beginning to converge, Aon notes in its report. In the past, HMO and POS rate increases were several percentage points lower than those for PPO and indemnity plans.

Sharon says Aon expects employers to respond to health care cost pressures by increasing copayments and premiums for employees.

Employers will also likely continue to explore new options, Sharon points out, such as consumer-driven health plans, disease management programs, pharmacy coalitions, health promotion incentives and tiered hospital networks (where reimbursement levels for a given hospital are based on the carriers ratings of that hospitals cost-effectiveness).

Consumer-driven plans, such as defined-contribution health care plans, are designed to get consumers more involved in controlling costs, notes Sharon.

The trend is toward plan designs that require more cost sharing by the consumer, he explains, thereby forcing employees to seek less expensive options, such as generic drugs over brand names.

“Part of the consumer-driven movement is that plan designs typically insulate consumers too much from the cost of their health care decisions,” Sharon says.

For dental plans in 2004, Aon found increases of 4.8% for HMOs, 7.6% for PPOs and 7.6% for indemnity plans.

Increases for stand-alone pharmacy plans averaged 17.7%, while for vision care, increases averaged 3.8%.


Reproduced from National Underwriter Edition, July 14, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.