Competition and efforts to give consumers financial incentives to hold down health care costs may be starting to put the brakes on health coverage renewal rates.[@@]
Preliminary results from a U.S. group health insurance renewal rate survey organized by Milliman Inc., Seattle, suggest that 2006 rate increases may average 10.6%.
If that 10.6% figure holds, 2006 will be the sixth straight year of double-digit health rate increases, according to Steve Cigich, a Milliman consulting actuary who helped write the survey report.
But the projected 2006 figure is down from the 11.2% increase projected for 2005, and it is the lowest increase forecast Milliman has published in 6 years.
Preliminary results for preferred provider organizations show that the projected 2006 increase will be 11.7%, down from a 12.7% increase projected for 2005.
An aging population, medical malpractice litigation costs, and rising rates of conditions such as obesity and asthma are some of the factors contributing to the continuing increases in health coverage rates, Cigich says.
But Cigich says he expects the final survey results, which will appear in October, will show that many employers will be shifting to “consumer-driven” health plan programs, or programs that combine high-deductible health coverage with various combinations of personal health accounts and personal health information.
Benefits experts in the Washington office of PricewaterhouseCoopers L.L.P. recently surveyed financial executives at 150 large and midsize U.S. employers.
About 35% of those executives said their companies already are offering high-deductible health plans, and 25% are offering the new health savings accounts, according to the researchers who ran the survey. Another 8% of the executives said their companies will be adding HSA programs in the near future.
Even employers that are keeping traditional health plans are asking employees to pay higher deductibles and coinsurance rates. Some surveys have found that efforts to shift costs to employees have slowed in recent months, but more than 75% of the participants in the PricewaterhouseCoopers survey said their companies were thinking about asking employees to pay a greater share of health coverage costs.
Meanwhile, although group health carriers in many markets face relatively light competition, competition may be helping to hold down rate increases in some markets.
In Indiana, for example, 5 of the 6 health maintenance organizations are reporting declining profits, and total Indiana HMO industry revenue increased only 1% in 2004, according to HealthLeaders-InterStudy, Nashville, Tenn.
The PricewaterhouseCoopers researchers say years of double-digit health coverage cost increases may start to hurt the job market.
About 50% of the executives who participated in the firm’s survey said increased health care costs have contributed to slower profit growth at their companies over the past 12 months, and about 20% of the executives said increased health care costs may force their companies to slow hiring of new permanent employees in the year ahead.
Allison Bell contributed information to this article.