Aon: 10.6% Increase Seen in Employer Health Costs

Health care costs are expected to increase on average 10.6 percent in the next 12 months, according to Aon Consulting Worldwide, the global human capital consulting organization of Aon Corporation.

Aon Consulting surveyed more than 70 leading health care insurers, representing more than 100 million insured individuals, and found that health care costs are projected to increase by 10.6 percent for HMOs, 10.5 percent for POS plans, 10.7 percent for PPOs and 10.5 percent for CDH plans. These represent the lowest trend rate increases since the study began in 2001, and are slightly lower than one year ago, when HMO cost increases were 10.9 percent, 10.8 percent for POS plans, 11.2 percent for PPOs and 10.7 percent for CDH plans. (See page 3 for trend data from Aon Consulting's prior health care surveys.)

"Unlike some other healthcare trend surveys, Aon Consulting's survey reports the expected future increase in employer-provided health plan claims cost before any plan changes, based on the opinions of health plan actuaries," said Bill Sharon, senior vice president with Aon Consulting and director of the study. "We provide this trend data to help employers evaluate the competitiveness of health insurance premium renewals. For employers with self-funded health plans, this trend data helps them (and their actuaries) develop future claim estimates for budgeting purposes."

Aon Consulting's U.S. Health & Benefits practice director, John Zern, said of the survey results: "While the medical trend rate is still more than twice the consumer price index, it is encouraging to see that health care cost rate increases are continuing to slow down. This is a step in the right direction for companies nationwide that continue to feel significant health care price pressures."

Sharon attributes the decrease in the medical trend rate to more employers and employees taking advantage of wellness, health promotion and consumer driven programs. "But more must be done to truly stem the tide of rising health care costs. This includes greater senior management support for these programs, better employee communications and more consistent cooperation from the medical community," he said.

Prescription drug costs are expected to increase 9.2 percent, which is slightly lower than the 9.5 percent trend rate one year ago. The specialty pharmacy trend rate is 12.2 percent, down from 15.1 percent in spring 2007. Aon Consulting points to the sluggish rate of drug adoption across the board, compounded by the FDA's reduced rate of drug approvals - especially for new molecular entities and biologic products - as the contributing factors leading to this decline.

In addition, health care rate increases for retirees over the age of 65 are projected to be 7.3 percent for Medicare Supplement plans and 7.7 percent for Medicare Advantage plans, down from 11.2 percent and 9.2 percent, respectively, one year ago.